One only has to look at the soft drinks industry at the moment to truly understand the importance of innovation. The Government’s sugar tax has placed soft drinks manufacturers between a rock and a hard place. Do they change their product to duck the tax threshold, or risk passing on the cost to consumers?
Pepsi has taken the lead and invested heavily in R&D and innovation to create low-calorie, craft products that resonate with a modern consumer. In fact 45 per cent of Pepsi’s revenue is now from ‘guilt free products’ born from extensive R&D. Deciding how to approach the tax will be difficult, but Pepsi has already made its choice and others will have to take similar approaches to stay competitive.
It is clear that innovation often saves the day. However, despite the obvious benefits of innovation, the UK is worryingly at the bottom of the G8 when it comes to spending on research and development.
Of course, for any business, and especially small businesses, the prospect of R&D can be daunting. In order to innovate, a company has to dedicate time, workers and resources, with no guarantee of success. Furthermore, while there are many financial incentives available for investing in innovation, the process of applying for tax relief, grants and funding can be complex and confusing.
Many companies simply do not know what options are available, what’s most appropriate for them or what they can even claim as R&D, meaning they often don’t apply. Even when companies do acknowledge what is available, the prospect of high costs, complex applications and swathes of jargon often result in companies failing to take advantage of the opportunities presented to them.
But R&D and innovation should not be scary. Instead, it should act as a vehicle to growth, allowing companies to take their businesses to the next level.
Government incentives and reliefs for R&D have improved greatly in the last six years and there are ample opportunities for companies to benefit from government schemes such as R&D tax relief, RDEC, and R&D Capital Allowances. Take the manufacturing industry. While it is a well-trodden area for R&D especially new product development, there are a number of areas that may qualify for tax relief that companies within the industry are often unaware of. For example, transferring to a new production facility (no two facilities are the same) whilst ensuring the resulting end product is identical to the original, or integrating processes into one fully automated process and even significantly reducing waste through process or machinery innovation could all qualify.
These are just a few examples, but they highlight the huge scope for relief associated with all forms of innovation. R&D tax incentives are even available for unsuccessful innovation and R&D projects.
Yet such is the complexity of the various schemes, coupled with misunderstandings and widespread uncertainty about what they entail exactly, that SMEs and larger businesses will often benefit from working with specialists to guide them through the process and help maximise their tax relief and/or cash benefits.
Ayming (formerly Alma CG) knows the industry because it is built on a foundation of innovation itself. We’re strongly committed to a philosophy of “challenge old thinking” and that is why we’ve adopted a unique combination of scientists, engineers, software developers and other specialists alongside our tax experts. This innovative approach and our success rate in helping businesses unlock funding has allowed us to grow into the European market-leading consultancy in the space. As a group we now analyse over 15,000 R&D projects every year.
Steve Jobs once argued that innovation distinguishes between a leader and a follower. With a specialist partner, companies can be empowered to fearlessly lead in their markets.