Measures introduced in the Autumn Statement are ‘good news’ for medium-sized businesses (MSBs) with an eye on innovation and growth, according to the Leicester office of Grant Thornton UK LLP, but the battle for talent continues to present major challenges, it says.
Trevor Shaw, Business Tax Director in Leicester, speaking at the business and financial advisory firm’s Autumn Statement update event for East Midlands-based businesses, said: “The government’s pledge to abolish employer’s National Insurance Contributions for apprentices aged under 25 presents MSBs with tangible financial benefits for their commitment to nurturing and supporting young talent.
“Similarly, changes to the R&D tax credits and related deductions also present potential for both SMEs and larger companies to secure tax relief on investments in innovation across product and business developments. It is good news that R&D Expenditure Credit will be increased from 10% to 11%, effective for spend incurred with effect from 1 April 2015. For companies claiming under the SME regime, the additional deduction has increased from 125% to 130%.
“However, both these elements of the Autumn Statement face some individual challenges for companies in the East Midlands,” says Trevor.
“Local employers continue to cite a lack of colleges running relevant and suitable courses for the apprentices they appoint, and this is an ongoing challenge for local SMEs and MSBs that need college-based training in the right skills to complement the work-based training for apprentices. Greater provision needs to be made as local business would certainly do more for apprentices if they were sure of the college-based training being both available and up to scratch.
“The Chancellor stated there are almost 2 million apprentices, with a target for another 1 million apprentices over the course of the next Parliament. We welcome the changes to NIC which are certainly a step in the right direction, and the challenge is to now equip people with the right skills for today’s market.
“Innovation and innovative companies play an important role in the UK and regional economies, but a significant percentage of East Midlands businesses simply don’t understand enough about R&D tax relief and Patent Box in order for them to take full advantage of the government support and tax relief available to them,” Trevor says.
“A great number of East Midlands businesses are investing in innovation, whether in capital equipment or people, or developing new products. Many will spend in the region of £20,000 to £30,000 on new innovations, including staffing costs, but they do not realise this type of investment qualifies for R&D tax relief. An innovation specialist or tax adviser can quickly check if a company’s investment would qualify, so more MSBs should take advantage and the tax relief can be significant.”
The current R&D tax relief is not the ‘long-winded’ process some believe, as Trevor explains: “Working with one East Midlands based MSB, we quickly established the company and its work qualified for tax relief, processed a claim, and secured £50,000 R&D tax back within just a few weeks.”
Grant Thornton’s Leicester office has approximately 120 staff providing business and financial advice across Corporate and Personal Tax, audit and assurance, employer solutions, corporate finance, and sustainability, to organisations across the East Midlands.
