How can businesses make R&D investment a priority?
Today’s business world is hectic, fast-paced and challenging which makes development and innovation truly essential to a company’s survival. The good news is that there is help available for UK companies looking to innovate in the form of research and development (R&D) tax credits. In addition to gaining the obvious technological advancements as well as the competitive edge of new products and systems, the government’s R&D tax credit incentives reward businesses by boosting their cash flow too.
Not only that, the door is then opened to a range of other benefits that come as the result of a well-fostered R&D culture within the business. Ultimately, a healthy programme of innovation will help a business grow and thrive which is good for the UK economy too.
Why is research and development important for a business?
Put simply, research and development keeps a company competitive, not just within the UK but globally as well. After all, why get left behind by standing still? When businesses innovate and the economy performs well, everybody benefits through things like improved exports, higher tax take and extra jobs. The government has taken this seriously over the years which is why it has offered such a broad range of support for research and development projects.
How is R&D in business actually defined?
Businesses within each sector or industry are likely to have a slightly varied opinion as to what research and development actually is. Indeed, not all innovation qualifies as eligible R&D, as important as each project may indeed be. There are a couple of key tests to keep in mind when deciding if the work being undertaken does qualify as R&D for the purposes of R&D tax credits. These are:
- Are you are looking to resolve a particular technological or scientific problem?
- Are you taking a risk regarding whether the outcome of your project will be successful?
If the answer to both these questions is ‘yes’, then your company’s project - whether it be a transformation programme, a new product or service or an upgraded IT system for example - could well be a qualifying activity.
R&D tax credits are vital to a company because they offer an essential cash injection which is based on actual expenditure on qualifying R&D works. In fact, it could be worth between 10p and 33p for each pound spent. This is why it’s so important for businesses to build a culture centred round R&D; it allows for better informed decision-making and a strategic approach which is so important for long-term success.
By identifying R&D right at the beginning of your project, and maintaining accurate records of the work undertaken, R&D is already starting to seep into your company’s culture. Don’t forget as well that improved records can invariably mean more substantial tax credit claims which is vital to cash flow. Additionally, you are automatically creating the opportunity to enjoy financial benefits by ensuring your staff remain focussed.
The power of R&D-informed decision making
So far so good, but there’s even more to follow. Once a business starts fostering a culture of R&D, a detectable change in behaviour and attitude towards the company is bound to occur. Importantly, research and development starts to become an integral part of the company’s decision-making going forward. It also helps businesses to understand the financial risks intrinsic within innovation and will reduce them thanks to the help which R&D tax credits offer. Furthermore, the culture of R&D isn’t only applicable to outward facing projects destined for the marketplace or designed for your clients. It can instead be usefully applied to a company’s own internal works, for example in an IT infrastructure upgrade. Providing the qualifying criteria is met, it matters not whether the innovation work being undertaken is for your own business or for the benefit of your customers.
Boost your people power
Whatever sector your business is in, the people who work there are key to its success; people are what culture is all about. In fact, we have found from experience that a very large proportion of businesses – around half – decide to plough the money obtained from R&D tax credits back into taking on new staff. This is fantastic for businesses as each new staff member will bring a mix of skills and experience to the table, plus a new perspective and more capacity. Additionally, of course, the wider economy also benefits from more jobs, indeed, in certain sectors it can highlight a shortage of staff and bring the requirement for highly skilled staff to the fore. This in turn can lead to a significant change in how we educate and train future generations.
But what about existing staff? Well they’re just as important. As well as aiding the funding of new team members, a strong culture of R&D will improve how existing staff see the company, putting it in a better light which is vital for staff retention. When each employee sees how much R&D is worth, creative thinking and innovative approaches begin to become the norm. Positivity feeds positivity, with staff that enjoy and participate in the challenges that innovative activities can bring.
Tips on promoting a culture of R&D effectively
At Myriad Associates, our parent company, we take R&D seriously, and will encourage the fostering of a healthy culture in innovation wherever we can.
The first thing we recommend is that when you make your first claim, ensure that you fully understand what actually triggers R&D in terms of tax credits. Make sure your in-house finance and accounting teams understand these triggers as well. By involving these particular teams - as well as your staff at large - in the planning and processes around R&D, you will encourage further innovation opportunities to present themselves. Additionally, it can help staff feel even more valued as it gives them a stake - and a voice - in the business.
We also highly advocate a strong ethos of internal education and communication around R&D. Hold regular staff briefings, team discussions or anything else that brings the message home to staff about the importance of innovation, not just for the benefit of R&D tax credits but for the wider opportunities innovation can bring. Don’t forget, inspiration is infectious!
Are you looking to nurture an R&D culture in your business?
Whether you’re a long-established company well versed in R&D tax credit claims or you’re brand new to this highly beneficial tax incentive, Myriad Associates is happy to help with all aspects of R&D culture in addition to managing your claim.
Our expert team is made up of a broad mix of tax advisors, accountants and specialists, all ready and waiting to help you unlock your company’s full potential.
Don’t forget, our Tax Cloud calculator is also available to guide you through the R&D tax credits claim process. It’s quick and simple to use so saving you time and hassle, plus you’ll instantly see how much you might receive.
Call us on 0207 118 6045 or use our contact us page and speak with one of our tax relief experts today
- 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
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