Following the referendum result, it's fantastic that companies are continuing to focus on innovation and seeing the importance of taking a long term view.
With the CBI report and the Autumn Statement coming almost together, it seems like a good time to highlight three key innovation incentives for businesses:
R&D tax credits are often a crucial bridge for start up tech companies, between the initial personal funding and seed capital. Small and medium sized companies undertaking qualifying R&D work are entitled to a super deduction of 230% of qualifying costs (generally salaries, consumables and some indirect costs, and payment to subcontractors which are capped at 65% of the cost). If this creates a loss this can be surrendered to HMRC for a cash payment equaling 14.5% of the loss surrendered.
The scheme for large companies differs in that it gives an 11% credit which sits above the line and is included in operating profit. This may also be repayable in cash (at a rate of circa 9% - ie net of corporation tax) where the large company is loss making.
To support SMEs in their claims we have developed Nifty, an online platform for calculating and submitting R&D claims:
The second, and sometimes forgotten relief is Research and Development allowances (RDAs). These give a 100% writing down allowance for fixed assets used in the R&D process.
The final incentive is the patent box. This effectively allows companies who have developed patents and are now deriving profit from them, access to a 10% tax rate, but there can be some tricky considerations around who developed and owns the patent and how the proportion of income allowed into the patent box is calculated.
With suggestions that the government may look in more detail at innovation incentives as part of the Autumn Statement - watch this space.
Some 70% of UK firms are planning to increase or maintain their spending levels on innovation following Britain’s decision to leave the European Union, new research suggests. A survey of 800 businesses, carried out by the Confederation of British Industry (CBI) alongside financial services firm Deloitte and recruitment company Hays, has shown that 7 in 10 intend to focus on innovation going forward. Just 7% of companies said they intended to reduce their spending on innovation following the Brexit vote.