Stephen Sacks is the founder of Funding Nav and author of Reboot your business. In this extract from the book, Stephen explains the different ways that you can raise more money for your business – for free.
R&D Tax Credits
The UK rate of corporation tax (on profits) is already at the historically low of 19% at the time of writing, but for companies that invest in risky or novel ideas that relate to their products, services or processes, further discounts or even refunds are allowed. These are particularly generous for small to medium-sized businesses with under 500 employees. Effectively they allow the claiming company to multiply their relevant costs by 2.3 for accounting purposes only, and to go back and reclaim the last two financial years.
This is by no means an easy process and certainly not automated like payroll taxes and sales taxes, which are calculated simply and arithmetically. Successful reclaim of R&D requires the company to submit both a narrative case to HMRC setting out the story behind the project, and the allowable costs. It is highly subjective and is best undertaken by an external consultant who does this all the time. R&D reclaim demands a lot of lateral thinking, and some of the more successful claims that Funding Nav has competed for clients on a ‘no win no fee’ basis have related to failed projects that were subsequently canned. This is because failure is a great proof that the project was risky, but there is R&D to be found across businesses in surprising places.
We have managed to reclaim six-figure sums for business as diverse as cafes, TV production, recruitment and fashion companies. It is interesting that there is normally internal resistance from the FD when we suggest it because they don’t really understand how to maximise the impact of R&D reclaims. I suppose sometimes they are also reticent because they feel they should have suggested it themselves.
Some industries, such as video games and film, have enhanced schemes and businesses that hold patents are able to register for the patent box scheme, which is a very generous tax break ongoing.
The government are pretty keen on paying out under this scheme as they see, on average £6 in additional taxation raised over time by companies that have reclaimed R&D for every £1 that they paid out, because obviously research, development and innovation generally drive higher profitability and more employment and tax-take over time.
Whilst R&D is a pretty common if somewhat underused resource, grants are an increasingly rare commodity. This has nothing to do with availability, as you can see from the somewhat lengthy list featured here, but more to do with perceived difficulty of obtaining this enormously valuable resource of free cash.
As with R&D tax credits, the devil is definitely in the detail in applying for what is generally government money to subside your venture. Writing the application is a key and lengthy task that should really be done by someone who is experienced, with a comprehensive understanding of the vagaries of the system.
Meanwhile, here is a pretty comprehensive list of what’s currently available but bear in mind that the position with grant money is that it’s highly fluid, and schemes open and close more frequently and often without notice. All the funding details below were correct at the time this book went to print. However, if you notice that any grants are no longer available, then please either search in your browser or head over to www.fundingnav.com for the latest information.
Innovate UK: Innovation Grants Programmes
Innovate UK is the official innovation agency for the UK government. As such is runs a range of national and European funding programmes providing grants to support UK businesses who are on the cutting edge of innovation and technology. The principal funding programmes and innovation grant initiatives are detailed below. Under these programmes, each year calls for businesses from different sectors/stages/technologies are put out, and active grants are usually listed.
Innovation Vouchers provide a relatively small but useful government grant to develop an innovative idea or new product by giving you expert know-how. Innovate UK will help you source the right expert for your business from one of the following:
Universities and FE colleges
Technology and Research institutions
Consultancies and Catapult centres
Advisors on design
Funding: £5,000 to pay for externally-based experts and consultants to grow your business.
The Launchpads grant funding competitions are for companies looking to turn new, innovative and exciting ideas into viable commercial projects. The grants are primarily for business in specific areas of the country and are allocated three times a year (these change intermittently, so check the site).
To be eligible for a Launchpads grant you need to be a small or medium-sized business in the early stages of development, working in the technology industry, be in an applicable geographical cluster or be planning to move there, and have ambitions to grow your company.
Funding: up to £100,000, but you must be able to match the grant amount with the same amount of private or self-funding.
Small Business Research Initiative (SBRI)
The SBRI provides contracts and funding for businesses to carry out research into, or the development of, new products or services for the public sector. The programme aims to fund innovative ideas that can enhance public services or solve a specific public-sector problem. Any business is eligible to apply for an SBRI contract or grant.
Funding: initial funding is between £50,000 and £100,000, with additional funding of up to £1,000,000 to develop to develop your project or idea further.
The Smart Grants scheme provides grants for start-ups researching and creating significant technological or scientific breakthroughs.
Three kinds of Smart Grant are available:
- Proof of Market, 60% match funds, £25,000.
- Proof of Concept, 60% match funds, £100,000
- Prototype Development, 45% match funds, £250,000
The level you apply for depends on the stage of your company, your finances and what you are looking to develop. You will need to be an early stage business, have serious growth ambitions and work in the technology, science or engineering fields.
Funding: £25,000 – £250,000
For more business advice and guidance, Stephen Sacks’ book Reboot your business is published by Compass and available to buy on amazon and WH Smith now.