Earlier this month Rob & Simon had a tour of the Science & Technology Facilities Council labs at Daresbury (pictured) and it got them thinking. If you’re considering investing in your company’s IT infrastructure, let us find out if you’re eligible for grant funding.
IT projects can be expensive and the capital expenditure is off-putting, but what you may not realise is you can claw much of the cost back through tech grants and tax credits.
Plus the cost comes off your company profit which reduces your Corporation Tax liability, and you’re left with a software solution to which you own the intellectual property rights, thus giving your business a unique asset and increasing its valuation multiplier in any future trade sale.
In 2017, a study by the Department for Business, Energy & Industrial Strategy found that businesses that received financial support were more likely to experience increases in turnover and employment.
Finding a grant funding solution is not as difficult as you may think. We work with a number of partners who specialise in this area and who have helped clients to navigate the maze of funding options and the application process .
Loan vs grant
Loan – what is it?
An amount you must pay back by a specified date, usually at a preferential rate of interest. These are offered by Government-funded bodies and are usually more favourable and easy to secure than high street bank loans but they are usually only available for very specific projects . For example, the Innovate UK fund will provide loans to micro, small and SME businesses for highly innovative products, processes or services with a clear route to commercialisation and a focus on emerging technologies.
The up-side of a loan
- Generally easier to secure than a grant.
The down-side of a loan
- It has to be paid back!
Grant – what is it?
A sum of money you do not have to pay back, usually available to part-fund a project. R&D grants are offered by the Government, regional bodies, local councils and other organisations with the aim of creating growth in the economy. Grants have enjoyed a resurgence in the last couple of years since the Government announced an R&D budget of £39.8bn for 2022 – 25, the largest ever allocated.
The up-side of a grant
- The money doesn’t have to be paid back.
The down-side of a grant
- Visit the UK Innovation Hub or British Business Bank and you’ll soon see there is a very long list of grant and loan schemes, each with different objectives and eligibility criteria. The British Business Bank says that applying for a grant can be ‘complicated and time-consuming…schemes can also be very competitive’. Don’t let this put you off. Once we understand what you hope to achieve from your IT project, we can help you cut through the noise and pinpoint the schemes that would be relevant to your business.
Applying for a grant – without the headache
It’s important to note that the funding can be used to pay for expert input, for feasibility testing an idea to make sure it will work, to create a new product, process or service or to improve an existing one and to work with other businesses on collaborative projects. Fortunately, many IT projects are eligible to apply as money is available for ‘innovative products, services and processes’, and IT projects are nearly always innovative!
As we have stated, you have to meet strict criteria to qualify for a loan or a grant and go through an application process. Some are more involved than others but even the simplest of processes can take time and divert your attention from the immediate priority of running your business.
In many instances, the process begins with a workshop about the process! So to invest the time required in making an application, you’ve got to know three key things:
- Will the project make a material difference to your business
- Do you meet the eligibility criteria?
- Do you stand a good chance of being successful?
How to make a successful application?
Again, our experience with the application process of myriad loan and grant funding schemes, along with our partnerships with funding specialists, means we can help you answer these questions before you’ve invested much time and energy into the process.
If there is a grant scheme available, we can then support you to make a strong application with minimal impact on your time.
Not only does the project need to be properly scoped in terms of the tech solution, it also needs to be supported by a business case that underpins the potential value of the investment to growing your business and benefiting the wider economy. It’s fair to say that we understand the level of input required to make a successful application .
No grant? Go for tax relief instead
If you do not wish to apply for a loan or a grant, or your application is not successful, it’s worth knowing that you can apply R&D tax relief.
Whilst you won’t save money on your initial investment, you will be able to recoup costs with a tax refund once your R&D project is in motion.
In the Autumn Statement, the Chancellor announced that the existing Research & Development Expenditure Credit and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1st April 2024 being claimed in the merged scheme. The rate under the merged scheme will be set at the current RDEC rate of 20%. The notional tax rate applied to loss-makers will be lowered from 25% to 19%.
Why you cannot afford to lag behind
We live in an increasingly tech-reliant world.
Companies that fail to invest in technology will get left behind by the competition as other businesses embrace new ways of working to find faster, more efficient ways of serving their customers.
Your customers may be loyal, but they’re under pressure too so want an efficient way to get what they want. When it comes to your staff, they need easy access to reliable data, presented to them in a way which makes it easy for them to make informed decisions.
Like it or not, your business has to keep pace.
Hopefully, this article has shown you that the cost of an IT investment need not be prohibitive, there is plenty of help available if you know where to look and how to apply.
As the UK Innovation Hub summarises: “It’s important to carefully consider funding options that match your innovation’s stage, growth goals, and business model for the right financial assistance and strategic alignment.”
Let us help you scope your IT project, review options and obtain the funding you need to take your business to the next level.
