R&D tax relief for fight against Covid-19

Will research costs hinder manufacturers as they redirect their efforts to produce ventilators and PPE?

23 April 2020


The initial response from British industry to the coronavirus crisis has been overwhelmingly positive. Manufacturers are demonstrating their ability to pivot operations quickly to meet the demand for much-needed medical supplies, including products like ventilators and personal protective equipment (PPE) for healthcare workers.

However, even for the most agile manufacturers, the challenges involved with suddenly having to produce all-new products and components at unprecedented speeds are huge, and not without setbacks. Businesses moving from hairdryers or vacuum cleaners on to ventilators are now faced with dauntingly hard tasks, like sourcing and assembling whole new sets of tools and components, and getting the necessary processes for designing, testing and commercialising new products up and running in just a few weeks.

The cost of switching to new products

Making such broad operational changes in such a short time frame may prove very costly. The UK government, through initiatives like the Coronavirus Business Interruption Loan Scheme (CBILS), is doing what it can to support manufacturers and other businesses financially. But applying for loans under schemes like CBILS is still likely to take time, and it could be several weeks before some firms begin to receive funding from the state. Inevitably, many manufacturers that are now switching to products like ventilators will have to pay for the cost of doing so themselves, at least in the short-term.

Sandy Findlay, the partnership director at tax specialists ABGI UK, says that manufacturers should be prepared for an “intensity” of R&D costs over the coming weeks. “These sorts of projects, which involve changing a manufacturing line or introducing a new product, might ordinarily take companies six months to a year,” he says. “Now companies are being asked to do it in two weeks.”

Article originally published on Lombard, RBS Business Hub, NatWest Business Hub and Ulster Bank

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