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Innovation Tax Incentives and Grant Funding

Innovation Tax incentives are a great initiative for rewarding innovation and, for those looking to grow their businesses, a timely cash injection is always very welcome. There are many funding schemes which businesses can take advantage, as outlined below:

 

TAX INCENTIVES

R&D Tax Credits

In 2000, the Government introduced a scheme to encourage scientific and technological innovation in the UK. The R&D Tax Credit is a relief against Corporation Tax (CT) which either reduces your liability in prior (or future) years or, if you are loss-making for tax purposes, may entitle you to receive a cash tax credit payment.

There are two scheme variants dependent upon whether your business qualifies as an SME or as a ‘large’ company. Either way, we establish this with you before the process begins.

Patent Box

The Patent Box scheme aims to create a competitive tax environment for companies to develop and exploit patents in the UK, supporting business investment and growth. It is a key element in the Governments’ Growth Plan to provide additional incentives in order to develop, commercialise and retain the best technologies and inventions in the UK.

If your business has any pending or granted patents, you could be eligible for a significant tax saving as profits from the patented product (or process) may qualify for a reduced corporation tax rate of just 10%.

Capital Allowances

Capital Allowances recognise expenditure incurred in the purchase of commercial properties and other assets as a tax allowable expense (unlike ‘depreciation’), reducing taxable profits and the associated tax liability.

Creative Industries Tax Relief

Creative industry tax reliefs are a group of 8 corporation tax reliefs which allow qualifying companies to claim a larger deduction when calculating their taxable profits, or in some circumstances claim a payable tax credit.

As with R&D Tax Credits, these reliefs work by increasing the amount of allowable expenditure, thus reducing taxable profits and the associated tax liability. Where the reduction eliminates taxable profits altogether, you may be able to surrender the resultant taxable loss, converting some (or all) of it for a payable tax credit.

The reliefs include:

  • Film Tax Relief (FTR)
  • Animation Tax Relief (ATR)
  • High-end Television Tax Relief (HTR)
  • Children’s Television Tax Relief (CTR)
  • Video Games Tax Relief (VGTR)
  • Theatre Tax Relief (TTR)
  • Orchestra Tax Relief (OTR)
  • Museums and Galleries Exhibition Tax Relief (MGETR)

 

GRANTS

 Industrial Strategy Challenge Fund

The UK Government’s Industrial Strategy Challenge Fund aims to bring together Britain’s world-leading research base and their best businesses to transform how we live, work and move around.

Investing in the very best research, development and innovation will help tackle the major industrial and societal challenges we face today, putting the UK in the best position to take advantage of future market opportunities.

The fund is delivered by UK Research and Innovation and is part of Government’s 4-year, £4.7 billion investment in R&D that will support the delivery of its modern Industrial Strategy.

Small Business Research Initiative

SBRI is a cross-government programme managed by Innovate UK (the UK’s innovation agency) which enables small businesses to bid for government contracts to develop new products and solutions for the public sector. SBRI plays a vital role in supporting small businesses to commercialise their innovative ideas.

Innovate UK

Innovate UK is part of UK Research and Innovation, a non-departmental public body funded by a grant-in-aid from the UK government. Since 2007, around £2.5 billion has been invested to help businesses across the country to innovate, with match funding from industry taking the total value of projects above £4.3 billion. Innovate UK have helped c.8,500 organisations create over 70,000 jobs and added an estimated £18 billion of value to the UK economy.

Horizon 2020

The Horizon 2020 programme was established by the European Union (EU) as a collaborative financial instrument to help secure Europe’s global competitiveness in research and innovation. The programme – which runs from 2014 to 2020 – is seen as a means of putting Europe at the heart of world-class science and innovation, making it more competitive by creating economic growth and new jobs. It offers an open, simple structure for accessing funding in order to remove barriers to collaborative innovation, get new projects off the ground quickly and achieve results faster.

 Knowledge Transfer Partnership

The Knowledge Transfer Partnership (KTP) scheme helps UK businesses to innovate and grow by linking them with an academic or research organisation and a graduate. A KTP enables a business to bring in both new skills and the latest academic thinking to deliver a specific, strategic innovation project through a knowledge-based partnership.

This demonstrates that a range of funding is available to businesses and if used correctly, a company can utilise many of these at the same time, however it is essential to seek advice from a specialist who has knowledge and experience of all funding schemes. At Innovation Tax, our aim is to ensure our clients fully benefit from all available Government funding, thus demonstrating our value and building long term sustainable relationships.