Posted: 13/09/17 by Grant Thornton UK LLP
Northamptonshire businesses could be missing out on valuable financial support because they don’t realise their activities are eligible for research and development (R&D) funding, says the Northampton office of financial and business advisory firm Grant Thornton.
Although the term ‘R&D’ is often associated with science and hi-tech industries, the government definition is much broader and can apply to the work of businesses operating in a variety of sectors from agriculture and industrial manufacturing to construction and food and drink.
Grant Thornton also highlights that projects don’t have to be revolutionary to qualify for R&D relief. Funding can be granted to any business working towards advancement such as creating a new product or improving an existing product or process to become more efficient.
Lindsey Copland, Associate Director, Innovations at Grant Thornton Northampton (pictured), explains: “Many businesses assume their work doesn’t qualify for R&D funding if it isn’t carried out in a laboratory or doesn’t involve making ground-breaking discoveries.
“However, any activity classed as ‘progressive’ could be eligible. It’s certainly worth any business who thinks they may be entitled to funding, investigating the possibility. Our specialist team has worked with many local companies who had been forfeiting the opportunity to claim what can sometimes amount to thousands of pounds in tax relief.
“And the good news is claims can sometimes be made retrospectively, so businesses can benefit up to two years later.”
There are a number of routes by which Northamptonshire businesses could claim R&D relief:
Tax Credits and grants - These claims can be made up to two years after work has been completed. Innovate UK offers a source of funding for R&D work, with some successful applicants receiving up to 65% of project costs. However, government understandably favours projects where funding will make a big difference to the outcome so if a business has already committed money to an idea, it’s unlikely a grant will be awarded.
The application process for Innovate UK grants is competitive and can require a lot of time and effort, so it’s worth seeking specialist advice before embarking on a bid.
Capital Allowances - Capital Allowances are available on any capital expenditure incurred for research and development activities such as plant, machinery, equipment and facilities, providing a 100% deduction in the period the expenditure is incurred. Like R&D Tax Credits, Capital Allowances be claimed up to two years in arrears.
Patent Box - Businesses producing or working with patented items can look at how these are treated in tax returns. The Patent Box regime, introduced in 2013, provides a reduced effective tax rate on relevant profits arising from patents, including the sale of products incorporating a patented component and some services based on patented technology.
Early stage investment - Venture Capital Tax Reliefs are a key part of government strategy to encourage investment in small and growing businesses, many of which are involved in innovative activities. Each of the available reliefs, including the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trust (VCT), provide generous Income Tax and Capital Gains Tax incentives to investors, subject to certain limits and conditions being met.
Lindsey Copland concludes: “Amid the uncertainty of Brexit, financial assistance for innovative companies who will help support the UK’s economy going forward is more important than ever, especially as negotiations could mean current sources of EU funding are under threat. Northamptonshire businesses should make sure they are not missing the chance to unlock a potential cash injection.”