By Laurence Bard, Partner and Head of R&D Tax Services
Often R&D tends to be overlooked when looking at the strategy of a business. In some cases, management are too focused on day-to-day activities and driven by short-term financial targets, which prevents them from concentrating on areas likely to provide long-term benefits. However, in today’s fast-moving markets, R&D is a key element in terms of business growth, and can set you apart from your competitors.
Not just for the technology sector
It’s not just technology-intensive businesses that can and should be focused on development and innovation. R&D is relevant to businesses operating in all sectors, for example even property, financial services, media, and digital businesses. It can enable you to achieve your growth goals by further developing an existing product/service, resulting in an increase in the demand from customers, or by helping you to create new revenue streams.
A great example of this is food and drink manufacturer Innocent, which continuously seeks to diversify its range and stay one step ahead of its competitors. Another example is Google, a brand renowned for continuously adapting to market changes and developing new products that aim to be life-changing and at the forefront of the market, such as its launch of Calico, a spin-off company working to extend the human lifespan.
Among our clients are those developing software, crowdfunding, retailing, Formula 1 racing components, internet-based specialist holidays, and nuclear plant decommissioning strategies.
Improve your systems
In industries where R&D is less apparent, e.g. property or financial services, it can still be used to enable you to supply your customers or operate your back-office functions more efficiently. The financial services industry spends the majority of its R&D efforts in such areas as developing or improving trading platforms, or creating bespoke CRM systems, and enabling different systems to ‘talk’ to each other. In other industries, it may be as simple as developing a new website or app with bespoke elements or innovative ways of interacting with other systems.
R&D tax credits may apply
The UK government is promoting sustainable economic growth and encouraging businesses of all sizes to innovate by offering incentives such as the R&D tax credit. from HMRC. This is dependent on the amount of R&D expenditure incurred, the date of expenditure and whether the business is loss-making. Currently, small or medium-sized businesses can potentially receive a payment of £3,262 for every £10,000 spent in the year to 31 March 2015, which can significantly aid cash flow concerns and reduce the net cost of R&D activity.
While costs can be minimised by this and other government incentives, you will need a long-term view of your R&D strategy which should align with your overall business strategy. As GSK states, “R&D is no longer a budget...R&D is an opportunity to invest...” It’s an opportunity to take your business to a new level.
Do you qualify for R&D tax credits? For further information and our R&D calculator see https://www.smith.williamson.co.uk/r-and-d-tax-calculator