It may feel counter-intuitive to commit significant amounts of investment in your business right now, but that is exactly where many businesses find themselves in order to give them the ability to continue trading. As part of the latest #BusinessForTomorrow insights, Hazlewoods business advisers have provided some detail on the benefits of investing now and the opportunities available to help you to do so.
The speed of lockdown, which has resulted in a rapid change in working practices, exposed some inadequacies in the infrastructure of some organisations when dealing with challenges of this nature. While no-one could be expected to have planned for this pandemic specifically, disaster planning should have been part of all business operational plans; understandably, quite a few are currently being adapted and implemented.
The implementation of those plans is neither simple nor without cost, whether financial or otherwise. At a time where most businesses are looking to retain cash, the extra expense can be cause for concern and a reason not to spend. The alternative to not investing however may be unthinkable.
Support is available in the form of Government loans and grants and they have proved extremely popular. A full list of the support available can be found on our website, here, and we are more than happy to provide any help and guidance we can in assisting with applications. However, there are other valuable planning opportunities that should be explored when deciding how and where to invest.
Capital expenditure
Most businesses will be familiar with the availability of the annual investment allowance (AIA) which allows 100% of the costs of qualifying capital expenditure to be deducted from taxable profits for the year that the expenditure is incurred, rather than spreading the tax relief over a number of years. The limit for AIAs is currently £1 million for the calendar year 1 January 2020 to 31 December 2020 reducing to £200,000 for the calendar year 2021. For businesses that are having to purchase new equipment at this time, the type of equipment, the method of financing and the timing can all influence whether AIA is available.
In addition to AIAs there are currently 100% writing down allowances (WDA) on items that qualify as energy saving plant and machinery or environmentally beneficial plant and machinery and 3% writing down allowances per annum available on expenditure that qualifies for structure and buildings allowances. The availability of these allowance may influence investment decisions when looking into what equipment you should purchase.
Research and development (R&D) tax credits
R&D credits have been around for twenty years now. Designed to promote and encourage innovation, they have been claimed quite extensively across the country and across varying industries. R&D credits have been used where businesses are developing new products, services or processes that are innovative. In the current climate, where new ways of working are commonplace using limited resources, you can expect to see a great deal of innovation as management look to solve new challenges that they have not been faced with before.
This is an area that will likely be overlooked when considering whether a business is eligible to make a claim for R&D tax credits. When considering where to best use resources, the availability of this R&D tax credit may be a factor in determining whether a particular investment is preferable or viable.
The future…
However long the lockdown restrictions last, just about every business will have had to change or adapt in some way. Many of these changes will be permanent; indeed not changing may be detrimental and you may find yourself left behind your competitors. While support is available on competitive terms, now may be the time to invest in your business, to not only see it through the lockdown restrictions but also to secure its future.
If you are looking for advice on the best way to invest in your business now, please get in touch with Ryan Hancock at ryan.hancock@hazlewoods.co.uk 01242 237661. If you would like to discuss any of our other #BusinessForTomorrow content or have suggestions for content you would like to read that could help you and your business now and in the future, please let us know.