As a small to medium sized business owner, hitting the ground running with your business model can be tricky, especially when you have so many other SMEs and large corporations to compete with.

If you’ve been successful with your start-up to date and are now looking to progress onto the next stage of your entrepreneurial journey, it’s likely you’ll need a significant amount of investment to help boost your business onto that big next step.

Sadly, money doesn’t grow on trees - no matter how hard you squeeze your eyes and wish for it when blowing out the candles on your birthday cake (we’ve all been there).

Now, if you think the beginning of this blog post is sounding particularly pessimistic, worry not - we’re about to change that…

Luckily for many SMEs, the UK government’s research and development (R&D) tax credit scheme is available to help small businesses invest and progress into the next stage of their development. This is done by offering tax relief on all qualifying R&D projects they’ve undertaken that have resulted in the discovery of something new that helps forward their business.

Despite the scheme having been around for a number of years now, many small businesses are still completely unaware of what it is and how they could be eligible. So, in today’s post we’re running through how R&D could work for you and your small business, as well as detailing how applying for these tax credits could help elevate your enterprise to the next level.

What is R&D tax?

Research and development tax (widely known as R&D tax) is a type of tax relief that can see you claim back on any money spent on innovation within your business. This could be in the form of creating a new gin flavour, developing a piece of computer technology or building a prototype product, to name just a few.

The UK government introduced the scheme in 2000 to encourage businesses to innovate within their fields. You can claim back your tax credits not only on any materials you used to develop your ideas, but also on the staffing costs required to spend the time researching and creating your final product.

Does my project qualify? 

Naturally, because there’s a large amount of money at stake, there are certain rules and regulations your project must adhere to in order to be eligible for these tax credits - don’t worry though, they’re pretty simple! Some examples of qualifying R&D projects include the following:

• Developing activities to create a new product, process or software
• Product design and testing
• Using science or technology to improve an existing product or process
• Packaging solutions to, for example, enhance shelf life
• Developing food and drink to include less sugar and preservatives or to be made gluten-free
• Architectural investigations to enable improvements in systems

Is my SME eligible?

Simply put, the government will class you as a suitable SME so long as you have fewer than 500 members of staff and your turnover is either less than €100 million, or you have gross assets of no more than €86 million.  

To ensure you’re eligible, you’ll need to show how your project adheres to R&D guidelines and you can’t already be receiving any notifiable state aid or be subcontracted by another company.

So there you have it, a whirlwind tour of all things R&D for small businesses. If you’re interested in finding out more on whether your business is eligible to claim back tax credits, get in touch with Lumo today for some no obligation advice on all things R&D!