By Emma Lewis, Tax Cloud UK
Emma Lewis, Tax Cloud UK
Despite the pandemic, there were 5.5 million small businesses registered in the UK at the start of 2021.That’s a lot of competition!
How successful these fledgling businesses will ultimately become depends on a huge range of both internal and external factors. But investment in innovation, particularly when it leads to an R&D Tax Credit claim, is a very valuable tool in the armoury.
So what is it about innovation that’s so important for start-ups? Plenty! But here we’ll just focus on the three main benefits that start-ups should ignore at their peril.
Beating competitors
As the owner of a start-up you need to eat, sleep and breathe ambition. You dream of being the top of your industry, right? So be disruptive! It doesn’t matter what your idea for growth is. Some ideas will be totally out of left field but one or two might be the gems you need to succeed.
The only way you’ll stay ahead of your competitors is to innovate, innovate, innovate. It’s a sure way to build your brand and stand out from the crowd.
Hanging on to your market share
So you’ve launched an exciting new product or technology that everyone’s talking about. You’re steadily growing your market share and everything’s rosy. But now you’ve got ahead of the competition, how do you keep it that way? You guessed it – more innovation.
No matter how brilliantly your product and your brand is doing, never rest on your laurels. We see examples of this happening all the time. Even tech giant Apple started off as an industry leader some 15-odd years ago with the first iPhone. But many of its smartphone models since haven’t been as breakthrough as the ones before, hitting revenues hard.
Uber, on the other hand, has completely disrupted the cab sharing industry. Through constant innovation is has managed to retain its position as a market leader. From quick and easy ride sharing to premium cars, the company has gained a robust foothold in every market it has entered. It’s even now looking to expand its autonomous cars offering, having launched them in US city Pittsburg a few years ago.
Improving efficiency
Once innovation has been woven into the fabric of your start-up business it’ll soon be a key driver for everything you do.
One of the best knock-on effects of innovation is that it makes solving problems that much easier. Once more people start to work for you, they’ll be focussed on efficiency and improving the end product right from the start. They’ll also have vital input into how day-to-day processes can be streamlined, as well as how to reduce any waste. This is a huge advantage for a business, not just financially but in terms of agility and staff morale too.
Did you know, Google insists that each member of staff in every office puts aside an hour each day just to experiment and innovate? Instead of looking outside for new companies, the Internet giant has built a monopoly in the online space by strongly encouraging innovation from within. It has even set up an in-house “incubator” to grow any ideas that could just work. Many of its innovative products like Maps, Hangouts etc. have all been born this way in-house.
How are R&D Tax Credits helping companies with the cost of innovation?
The problem with innovative research and development, particularly for very small companies, is that it’s usually expensive. However, the government has long realised its importance, not just to the company itself but also for a stronger economy. That’s why back in the year 2000 it launched the R&D Tax Credits scheme.
Essentially, R&D Tax Credits help cover a substantial proportion of a company’s eligible R&D expenditure. It’s a tax relief which is offered against a company’s current or previous Corporation Tax bill. Even loss-making companies can benefit with a cash credit instead.
It’s a popular one too. According to latest Government statistics,85,900 R&D tax relief claims were made in 2020, up 16% from 2019. The total amount paid out to UK companies alone during the same time period was also an impressive£7.4 billion.
It’s one of the UK government’s most lucrative incentives to innovate, allowing up to 33.35% of a company’s R&D spend to be claimed back from HMRC. Certainly not something to miss out on.
“R&D Tax Credits provide a real opportunity for innovation to thrive”, said Barrie Dowsett, CEO of R&D tax claiming tool Tax Cloud UK.
“Any UK company in any sector can apply, with average claims easily running into tens of thousands of pounds. The resultant cash can be spent in any way a company sees fit, with many ploughing it back into innovative projects.”
To meet the requirements, the company must have undertaken qualifying research and development activities.
These include creating new products, services or processes from scratch, or substantially modifying an existing one.
One thing’s for sure though: Start-ups have it tough. This has always been the case, but in this new post-Brexit, post-Covid world life just got harder. The key is in maximising opportunities to innovate, taking full advantage of the R&D tax relief available.
Wanda Rich has been the Editor-in-Chief of Global Banking & Finance Review since 2011, playing a pivotal role in shaping the publication’s content and direction. Under her leadership, the magazine has expanded its global reach and established itself as a trusted source of information and analysis across various financial sectors. She is known for conducting exclusive interviews with industry leaders and oversees the Global Banking & Finance Awards, which recognize innovation and leadership in finance. In addition to Global Banking & Finance Review, Wanda also serves as editor for numerous other platforms, including Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.