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R&D for Start-Ups

Posted on September 22, 2021

The Research & Development Tax Credits scheme has been called “unusual” due to the fact that this time, it is the Government giving you money rather than taking it. Although the scheme has numerous benefits, it is still overlooked by business accountants therefore not advising their clients about it. Lots of businesses believe that they need to be carrying out ground-breaking projects to be eligible, but this is not the truth.

In 2019/2021 alone, there were roughly 665,495 start-up businesses in the UK alone, averaging at around 1,823 new businesses a day. Turning an innovative idea into a feasible reality can be a challenge and can often start off with start-ups running at a loss. The Research & Development Tax Credits Scheme is a great way to help turn these ideas into a reality with a well-needed cash boost. 

The UK Government has placed great focus on turning the UK into an Innovative Superpower by fuelling businesses who want to innovate with more access to investors, but also creating the most exciting place in the world for talented innovators to get to work, creating more innovative institutions/places and stimulating cutting edge technology missions to give the UK a strategic advantage. 

 The UK government has launched a new innovation strategy to strengthen science and research capabilities after its departure from the EU”

 A common problem is that many start-ups have heard of the Research & Development Tax Credits scheme, but they do not realise that they are eligible and are therefore missing out on a cash injection or Corporation Tax Break.  If a business takes a risk while developing new products, processes, and services or modifying existing ones through the trial and error method, then they could most probably apply for R&D Tax Credits, as long as the project is advancing scientific or technical knowledge.

Startups are often carrying out adaptive projects, but because they are not entirely inventive they are not believed to be eligible, however, startup businesses, in particular, are often trying to challenge or disrupt existing markets by creating new processes, services, etc or even improving existing ones, which is exactly what HMRC is looking to reward.

Small and medium-sized businesses can get 225% R&D Tax Relief for each £1 spent on qualifying activity such as staff costs, consumables, and some subcontract costs also. There are even benefits for loss-making SMEs, such as the given opportunity to carry forward losses or even convert them into cash to help your business’s cash flow – this is something that would benefit thousands of startups.

To find out more about how the Research & Development Tax Credit Scheme works, or if you are eligible click here.