Research & Development Grants - SMEs
The national Grants for Research and Development (GRD) scheme, administered in our region by Yorkshire Foward, provides finance to individuals and SMEs in England (partnerships/companies with less than 250 employees) to research and develop technologically innovative products and processes.
An SME can apply at any time for a GRD worth up to 60% of the cost of an R&D project, providing it can fund the balance itself. Four types of grant are available:
- Micro projects (simple, low-cost development projects of no longer than 12 months, with up to £20,000 available)
- Research projects (for investigating the technical and commercial feasibility of innovative technology, lasting 6 to 18 months, with up to £100,000 available)
- Development projects (for developing a pre-production prototype of a new product or process over 6 to 36 months, with up to £250,000 available)
- Exceptional development projects (involving a significant technological advance which is strategically important to a particular technology or industrial sector, lasting 6 to 36 months with a negotiable grant of up to £500,000 available)
- The new Proof of Market Grant helps you test the commercial potential of an innovative idea for a new technology - the result will be a thorough and professional analysis of the scale of the market opportunity
Research and Development Grants - Large Companies
Yorkshire Forward award R&D grants to large companies in Yorkshire & Humber in support of industrial research and pre-competitive development projects, or a combination. The current £24.2m round of funding began in autumn 2008 and runs until 2013.
Yorkshire Forward distinguishes between industrial research and pre-competitive development. Applicants need to think carefully about how this relates to their project, as different levels of grant support apply to each. There are official definitions and other funding conditions, such as which capital and revenue costs are eligible as total project costs which are all set out in the readily available support guides.
To receive support under this scheme, the project must:
- Have a total project value of between £650,000 and £2.5 million
- Last for 12-24 months
- Be business-led, with the main applicant a large company with a base in Yorkshire & Humber. Large companies which plan to move to Yorkshire & Humber may also apply, but will not receive an offer letter until they have a base in the region
- Collaborate with another organisation and/or knowledge base in order to maximise the potential of the research & development
The size of grants are up to the European Commission State Aid maximum rates:
- Industrial research: 50% of the project cost
- Pre-competitive development: 25% of the project cost
Tax Credits for Research & Development
The UK Government is keen to support research and development across the industrial base and has developed tax incentive schemes to give relief against such costs for businesses of all sizes.
The aim of the tax credit is to encourage greater R&D spending in order to promote investment in innovation.
The R&D tax credit can take the form of either significant cash back or a reduction in a company's tax liability. It is even possible to claim a grant and R&D tax relief on the same expenditure.
The R&D tax credit works by allowing companies to deduct up to 175% of qualifying expenditure on R&D activities when calculating their profit for tax purposes.
What is R&D for tax purposes?
R&D is defined by reference to Government guidelines. Broadly these guidelines provide that a project which seeks to, for example:
(a) extend overall knowledge or capability in a field of science or technology; or
(b) create a process, material, device, product or service which incorporates or represents an increase in overall knowledge or capability in a field of science or technology; or
(c) make an appreciable improvement to an existing process, material, device, product or service through scientific or technological changes; or
(d) use science or technology to duplicate the effect of an existing process, material, device, product or service in a new or appreciably improved way (e.g. a product which has exactly the same performance characteristics as existing models, but is built in a fundamentally different manner)
will be R&D for tax purposes if the project seeks to achieve an advance in overall knowledge or capability in a field of science or technology, not a company's own state of knowledge or capability alone.
What costs qualify for the R&D tax credit?
Companies can claim R&D Tax Credits for their revenue expenditure on:
- employing staff directly and actively engaged in carrying out R&D,
- paying a staff provider for staff provided to the company who are directly and actively engaged in carrying out R&D,
- consumable or transformable materials used directly in carrying out R&D (broadly, physical materials which are consumed in the R&D), and
- power, water, fuel and computer software used directly in carrying out R&D.
There are special rules regarding expenditure on sub-contracted R&D which differ between the SME and large company schemes. And there are rules which mean that in some cases projects which benefit from a subsidy or grant may have the amount of qualifying expenditure reduced.
How much can a company claim?
Claims can only be made in respect of the qualifying expenditure detailed above. Claims are made by reference to a company's accounting period. There must be qualifying expenditure of at least £10,000 on R&D in the accounting period in order for a claim to be made. There is no upper limit on the amount of the claim.