Business innovation grants can help fund enterprises of all sizes who want to carry out research and development activities, such as feasibility studies or developing prototypes. A capital injection can help businesses carry out these innovative activities faster and, in more depth, than relying on their existing financial resources. More often than not this non-repayable money comes from a Government source, such as Innovate UK or other research hubs.
What do they pay for?
Businesses may seek grants to cover a range of specific business innovation purposes, which are briefly outlined below.
- Experimental Development – Acquire, combine, shape or use existing scientific and technical knowledge to develop new or create improved products, processes and services.
- Feasibility Studies – Evaluate and analyse a project’s potential to determine if research or product and service development is viable to continue on a wider basis.
- Industrial Research – Planned research and critical investigation to gain new knowledge and skills for the purpose of product development or service or process improvement.
- Technical Evaluation – Carry out tests to determine and investigate technical suitability of materials, equipment, system or processes.
- Technical Feasibility – Carry out in-depth studies to assess the details of how you intend to deliver a product or service to customers.
What other reliefs can grant funded R&D projects benefit from?
UK businesses may also apply for R&D Tax Credits alongside grant funding for the same development work.
Research & Development (R&D) Tax Credits are a government incentive aimed at helping UK businesses by encouraging and rewarding innovation. For profitable businesses, this relief comes in the form of a tax reduction and for loss making businesses, the relief can be given as a cash payment from HMRC.
There are two R&D Tax Credit schemes each with a different rate of tax credit. The SME R&D tax credit scheme offers up to 33p for every £1 spent on R&D and the Research and Development Expenditure Credit offers around 10p for every £1 spent on R&D. What proportion of your R&D spending can qualify for the SME R&D tax credit scheme entirely depends on whether or not your grant falls into the following categories:
- Notified state aid – non-project specific grant
- Notified state aid – project-specific grant
- De minimis state aid grant
- Non state aid grant
Your Xsortal representative will be able to assist you in terms of R&D tax credits eligibility dependent on which of the above categories your initial funding falls into.
How do COVID-19 reliefs affect my R&D tax relief?
SME R&D Tax Credits are classed as Notified State Aid and means that R&D expenditure cannot be subsidised by any other state relief. Many of the Coronavirus emergency grants are also classed as Notified State Aid and this means that any business that is the recipient of Covid-19 funding will not be able to apply for SME R&D tax credits for the same innovative activity.
There is an exception where businesses can apply for a second type of R&D tax relief known as Research and Development Expenditure Credit (RDEC), which does not contain a restriction on subsidised innovation activities. This means that businesses may be able to claim from RDEC whilst receiving other Covid-19 reliefs.
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