Grant Thornton's Lindsey Copland on Innovate UK funding and R&D tax credits for businesses

Firms in Cambridge region could be missing out on sources of funding for their R&D activities

‘A lot of what we do is dispel the myth that innovation has to mean people in lab coats with Petri dishes or maths algorithms,” says Lindsey Copland, who is head of innovation for Grant Thornton’s central region.

“It takes different forms. We work with anyone from start-ups who have two or three people working in the attic to some of the large banks, oil and gas companies.”

Lindsey and her team help companies access government funding, such as R&D tax credits or Innovate UK money. Some companies may not even realise they are eligible.

“The definition from the government funding perspective is particular to each industry and the definition for R&D is deliberately broad,” says Lindsey. “For example, banks doing innovative things with their software or online banking platforms or manufacturing companies or chemical processors doing something innovative in their field may not be curing cancer or launching anyone into space, but there is real economic stimulus in improving their process or product.”

Having worked in Melbourn, Australia, for Grant Thornton and spent a lot of time working there with clients in biotech, automotive and manufacturing sectors, Lindsey is enjoying her role back in the UK helping companies in this innovative region.

“The companies that do the best tend to have a culture of reinvestment in people and in new technologies,” she observes. “I think tone at the top – particularly in the SME sphere – is important, a culture of doing things stronger, better or faster. The driver for that is almost irrelevant – whether it’s commercial or a desire to build something, if the core management team have the drive, especially in an SME, it really takes the business forward.

“It can be little things. Big manufacturers I’ve seen have prizes for the most innovative idea – they follow the Japanese philosophy of kaizen, or continuous, incremental improvement. They take it from the shop floor up.”

While Lindsey says she witnesses some talent leakage to London, she says funding is often one of the main barriers to innovation.

Her role, which covers Grant Thornton’s offices in Cambridge, Norwich, Ipswich, Chelmsford, St Albans, Northampton and Leicester, is designed to help firms hurdle this.

“We sit down with finance, technical and engineering and it’s rare that you get them all in the same room, so we actively encourage this and hold workshops with them,” she says.

Lindsey advises on how to access Innovate UK funding, typically released as competitions for specific fields and technologies – such as aerospace and aviation or unmanned vehicles.

“If you’ve committed the money already, you won’t get it as, logically, the government knows you were going to do it anyway,” she says. “The need for funding can be a compelling argument. They do like to fund SMEs.”

For those who have already spent on innovation, there is the opportunity to claim R&D tax credits as part of your tax return. The benefits for SMEs are, roughly, threefold those for larger companies.

“To qualify, there is a two-part test,” says Lindsey, “You must be seeking technical or scientific advancement – if a project fails, it’s still valid. In seeking advancement, there must be technological or scientific uncertainty. Essentially, it can’t be readily deducible by a competent professional.

“Then there’s quantification, which is the eligible categories of spend: staffing costs, an element of subcontracted manufacture, utilities, consumables used up, consumed or transformed as part of R&D, and software licences. I’m a big advocate of the scheme – it seeks to achieve the right things to promote innovation. It’s really important to a lot of the small start-ups.”

You should, of course, seek expert advice on your company’s tax position before starting to count your blessings as the return will depend on your wider tax position. However, firms in a non-profit phase could get back roughly one-third of what they are spending on relevant activities. The process means working out how to divide up your bills.

“HMRC is refreshingly pragmatic on this,” says Lindsey. “They want costs to be apportioned in a reasonable way. So it could be floorspace or number of employees, for example.

“For salaries, you’ve got researchers or scientists doing the core R&D and you’ve got qualifying indirect activities. For this, you ask yourself: Can the core R&D be executed without these individuals around the periphery feeding in, such as the ones proving out the design concept?”

In Cambridge life sciences, many start-ups will be advised to apply if they have investors or mentors involved – although they may not be making the most of their claim.

“It’s the more established middle enterprises – those who don’t have a dedicated tax team – who may not realise that they can make a claim,” says Lindsey, who advises seeking early advice.

Some clearly are, as Grant Thornton aims to expand the number of advisers in this field.

“It’s growing rapidly and people are making claims and reinvesting more,” says Lindsey.

Contact Grant Thornton in Cambridge on 01223 225600 or visit grantthornton.co.uk.