Column by Zoe Roberts, partner at BHP Chartered Accountants.
With an overall drop in profits across the top 50, in part caused by the margins of manufacturing companies being squeezed, it is clear that ensuring tax charges are minimised will be even more important.
Whilst the manufacturing sector has been a focus for government over the last few budgets, the recent changes brought few specific incentives.
Although the permanent fixing of the Annual Investment Allowance at £200,000 from 2016 onwards provides welcome certainty, a significant drop from the current £500,000, impacting particularly on plant intensive manufacturers. Companies looking to invest in their infrastructure should ensure they maximise the current higher limit.
Unwelcome EU attention was brought to the patent box regime and whilst changes are still to be confirmed, it looks likely that qualifying patents will be restricted to just those where the research & development has been carried out in the UK. The relief is still available in its current form and existing qualifying patents will be subject to grandfathering rules, so the scheme is certainly not dead and it is well worth looking at making claims. R&D tax relief continues to be generous but is still unclaimed by a large amount of qualifying businesses. Any manufacturer which improves its production process or is innovating products is likely to qualify and should consider a claim.
Many companies rising up the chart are in, or suppliers to, the property and construction sector. It will be interesting to see how the chancellor’s recent raid on residential landlords will affect the housing market. The table shows a small increase in the number of employees across the top 50. Initiatives like the apprenticeship program and reduction in National Insurance for under 25s may help employers in recruiting the next generation of manufacturers although the introduction of a national living wage is likely to increase costs across the sector.