Are you a growing business? Get money from the government to help with the costs
Innovation takes place when a company creates a new product, process or service (or updates an existing one) that then has a positive effect on their business. The ultimate goal is to reinvigorate an organisation, introduce a culture of innovation and boost its productivity.
Why does innovation matter in business?
Businesses need to be innovative for one simple reason, and that’s value. So that companies can thrive, it’s vital that they constantly improve and innovate. Successful innovation involves optimising existing channels, hunting out new sources of revenue and ultimately increasing profits. It will also hopefully offer businesses an advantage against their competition.
But why would the government care if a business grows or not?
A growing business is a thriving one. It’s a business that has plans for the future and the ambition to succeed - but it can’t do this without people.
Growth requires expansion, which in turn means taking on more staff. This could be in the form of full time employees, part-time or occasional staff, contractors, subcontractors or freelancers; everyone has their part to play. This extra staffing means more people are employed, more job roles will become available - and of course the knock-on effect is more tax-take for the government. Additionally, more people in work means less reliance on the welfare state (or so the thinking goes) and will hopefully make the UK more dynamic, profitable and able to hold its own on the world stage.
So what are the main tax reliefs available for innovative companies?
Despite the fact that growth and innovation are highly beneficial, not just for the company itself but the wider economy, it’s no secret that innovative work can also be expensive. The government recognises this, so has offered a number of tax incentives to help UK companies meet innovation costs. The three main ones are R&D Tax Credits, R&D Grants and Video Games Tax Relief (VGTR). Here we will take a look at them.
R&D Tax Credits
R&D (Research & Development) tax relief is an incentive offered by the government to UK limited companies to encourage growth and investment. The scheme serves to reduce the Corporation Tax bills that eligible companies must pay, or they can receive the credit in cash if the company isn’t profitable.
What defines R&D work for the purposes of the relief is deliberately broad. The relief is ultimately aimed at problem solving companies - those that can show they’re overcoming scientific or technological uncertainties or making ‘appreciable improvements’. If a business is bringing new products and services to market, improving existing ones, solving a particular customer problem or increasing efficiency, there’s a good chance it could qualify for the relief.
At the moment, R&D Tax Credits are one of the most popular and lucrative forms of tax relief on offer to SMEs, giving a 130% uplift on eligible expenditure.
How to make a claim for R&D Tax Credits
R&D Tax Credits can offer a funding lifeline to companies, either by providing a tax reduction or through cash reimbursement. It can literally be worth thousands - up to 33.35% of a company’s R&D costs - which is an awful lot to miss out on.
Looking to find out if your company qualifies, and how to claim? Find out much more on our R&D Tax Credits page.
The government provides a range of R&D grants and support via Innovate UK. Funding is obtained by entering a competition, and new funding competitions are announced regularly. These include:
- Projects that look to tackle one of several key 'challenges' identified in the government's industrial strategy. These are issues like better battery technologies, healthy aging and new types of creative content, like virtual reality for example
- An 'open' programme for funding innovation in any sector
- Assisting government organisations to realise their own innovative potential
Innovate UK also offers funding for schemes including Knowledge Transfer Partnerships that help companies collaborate with educational institutions.
Amounts offered vary and competition is fierce so it’s vital you make the very highest quality application possible. This is where we come in, as we have years of experience in this area and can guide you through the process to give the best chance of success.
Search for current innovation funding competitions or find out more on our R&D Grants page.
Video Games Tax Relief (VGTR)
The VGTR is a highly prized incentive that means companies involved in the design, development and manufacture of films and video games can receive help towards the cost. It’s offered by the UK government as a tax relief or a cash payment.
How much is VGTR worth?
VGTR is offered for video games that are entirely developed in the UK or the European Economic Area (EEA). It’s worth 20% of applicable spend. Applicable spend basically refers to money spent out on creating, developing and testing the game (including other post-release spending). However it excludes any maintenance, debugging or tweaking costs as well as the initial expenditure involved in designing the concept initially. As a simplified example, if a game has an eligible spend of £1m which was spent entirely in the EEA, the relief will be worth £200,000 (20% of £1m).
Different rules will apply if any part of the video game is developed outside the UK or EEA. This is a more complex area so we’ll be happy to go through this with you if required.
Find out more on our VGTR page.
How Tax Cloud UK can help
Tax Cloud UK is a cutting-edge, effective online portal designed to take the pain out of claiming R&D tax relief. Developed by the expert R&D tax team at Myriad Associates, there are separate sections for both businesses and accountants where your own figures can be added to easily see what you could claim.
Tax Cloud are specialists in all aspects of R&D tax relief assistance for UK companies. Made up of skilled accountants and tax experts, we have a proven track record in making successful R&D Tax Credit claims so you can rest assured you won’t miss out. If you think you may be eligible, contact us today on 0207 118 6045 or use our contact page. You could well be surprised at what you can claim.
- Submitting R&D tax claims since 2001
- 100% success rate
- Over £100m claimed and counting
- Industry leading specialists
- In-house technical, costing and tax experts
- Member of the Research and Development Consultative (RDCC) committee
Meet some of the team behind Tax Cloud