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As part of the government’s efforts in supporting businesses during the COVID-19 pandemic, high-growth, innovative UK companies will be offered £1.25 billion in taxpayer-funded loans. It is hoped that this bold new financial package will allow firms to continue developing innovative products and services, pushing forward UK growth once it’s ‘business as usual’.
Chancellor of the Exchequer Rishi Sunak has recently highlighted the fact that Britain is a global leader in innovation and that businesses investing in R&D are at the heart of our economy. It is hoped that these new measures, in addition to existing ones, will assist businesses in accessing the capital they need in these uncertain times, ensuring fast-growing, dynamic firms across all sectors can carry on with their efforts and spread prosperity.
The biggest feature of this latest financial package is a £500 million loan scheme called the Future Fund. It works by providing companies based in the UK with between £125,000 and £5 million from the government, with this commitment then matched by private investors. Firms need to be unlisted and UK-registered to be eligible, and must have raised a minimum of £250,000 in funding prior to the coronavirus lockdown. The first payments will be made by the middle of May and the scale of the fund will be periodically reviewed.
Loans will be distributed through the British Business Bank, and will convert into shares in the companies receiving them if repayment is not met. The government plans to offer £250 million until the end of September as a starting point, before the first review.
For UK companies involved in intensive research and development of new technologies, an additional £750 million of R&D loans and grants will also be offered via Innovate UK, the government body that supports business research projects. It has said that up to £200 million in payments to 2,500 existing customers will now be accelerated, while £550 million will also be made available to increase support to such companies. Approximately 1,200 hi-tech UK firms which don’t currently receive Innovate UK funding will be offered £175,000.
This package builds on the government’s ambitious commitment to increase public R&D spending to £22 billion by 2024-25. It also compliments the existing support for fast growing, innovative organisations, including the British Patient Capital fund of £2.5 billion, and the soon to be launched £200 million Life Sciences Investment Programme.
Obviously nobody can say for sure how the COVID-19 outbreak will affect R&D funding in time to come. But the new package is positive news for innovative companies wishing to invest in R&D so they can come out stronger once COVID-19 has subsided. With a surge of investment indicating an appetite to continue R&D grant funding opportunities going forward, it’s clear the government is keen to protect companies that drive UK wealth and growth.
The UK government has recently unveiled a new online portal for helping businesses access financial support to combat the adverse economic effects of the COVID-19 lockdown.
Called the Coronavirus Business Support Finder Tool, business owners will need to fill in a short online questionnaire to disclose details likes turnover, number of employees and location. Once this is complete, the various options available to them will be displayed and there’s additional information about how to apply.
Although this latest package is new, R&D funding in various forms has been around for a long time. There are several government-backed schemes that have been on offer for many years, providing a much needed financial boost to innovative UK companies. Particular schemes of note are R&D Tax Credits, R&D Grants and Video Games Tax Relief (known as VGTR).
The R&D Tax Credits scheme allows companies that have spent money on various research and development activities to gain a substantial relief on their Corporation Tax. For companies that have not turned a profit, the benefit can be administered as a cash lump sum instead. The scheme is also open to any UK company in any sector, regardless of size. As long as financial risks have been taken in advancing science or technology in the field, perhaps by creating a new product or service or improving an existing one, then R&D Tax Credits may well apply. Covering costs such as staff wages, certain overheads and software, materials and much more, it’s a highly lucrative offering providing as much as 33 pence relief for every £1 spent on R&D work. Find out more on our R&D Tax Credits page.
This has a similar ethos to R&D Tax Credits but it offers a non-repayable grant in respect of eligible R&D activities. It is run in the format of a competition, and winning bidders will be those who have made the highest quality application. It’s highly competitive however, which is why we strongly recommend using the services of an experienced R&D consultancy like ourselves. Discover more on our R&D Grants page.
This one’s for businesses in the video games and apps sector specifically. Administered by HMRC, the amount of tax relief your company receives is calculated on either 80% of your EEA spend or of your core expenditure (whichever figure is lower).
If your video game results in a loss, your company is then entitled to apply for a 25% tax credit on that surrendered loss. More information about this highly generous scheme can be found on our VGTR page.
If you would like to discuss anything we’ve mentioned in this article then the specialists here at Myriad Associates want to hear from you. Please call us on 01858 776 045 or use our contact form. We're operating as usual during the COVID-19 lockdown and will be happy to help.