Many rural businesses are failing to claim what they could from a combination of grant funding and tax relief, missing out on valuable support
There cannot be many businesses that would turn down the opportunity to access extra cash or unlock a very handy tax break.
And in these uncertain times, there can be even fewer farmers or rural businesses who wouldn’t want to reap the benefits of a fresh financial injection, particularly if it might support their efforts to improve their yield or boost efficiency.
According to David Kent of innovation funding specialists Leyton, too many Scottish businesses – including a significant number engaged in agriculture and the rural economy – are allowing opportunities to slide by when it comes to accessing what may amount to tens of thousands of pounds of support.
It is often hidden grant funding and tax relief that could create jobs, help solve a niggling problem or raise the business’s profile so it is seen as innovative, ground-breaking and visionary.
“Businesses are definitely missing out,” says Kent. “The level of awareness of different forms of innovation funding that is available varies from sector to sector.
“If you’re working in something like pharmaceutical research, there’s a chance you know about it and are already claiming.
“But there are lots of sectors that HMRC recognises are involved in research and development – for example, architects or dental laboratories, traditional engineering companies and farmers – but often these people will see what they are doing as just solving day-to-day problems. As a result, there is a massive amount of businesses not claiming for all they could.”
Alongside a wide range of innovation grants currently on offer, the UK R&D tax credit scheme allows businesses to reduce their corporate tax bill or receive a refund based on their research and development expenditure. There are also tax credits available for other areas, such as land remediation work or energy saving schemes. And that’s where Kent – the global tax specialist’s head of Scotland – and his expert teams in Edinburgh and Glasgow, step in.
Working hand in hand with its clients, the company’s technical and taxation professionals identify innovation funding schemes that are most in tune with their clients’ businesses and deliver maximum returns in tax credits or grant funding.
There can be rich pickings for those businesses who embrace Leyton’s no-risk, highly specialised assessment – bearing in mind fees only apply once they have identified savings for their clients.
Last year Leyton achieved £250 million worth of benefits for its UK clients, of which £30m was delivered to the 1200-plus Scottish businesses which it represents. And if that’s impressive, this year Leyton’s Scottish division is set to more than double that figure, to £66m.
It is income that can bring significant wider benefits. As Kent points out, since 2015, Leyton has achieved £50m in innovation funding and tax credits for businesses within Aberdeen’s oil and gas arena alone – a welcome boost to the north-east at a time when the sector was experiencing a wave of difficulties.
In fact, such is Leyton’s Scottish division’s success at spotting opportunities for businesses – from innovation grants to R&D tax credits, tax relief for land remediation and energy savings schemes, among others – that it has become the fastest-growing arm of the group’s global portfolio.
Its R&D claims alone have shown a
59 per cent increase in the last financial year, compared to a 45 per cent rise in the rest of the UK.
In response to such a clear appetite for innovation in Scotland, last year the firm moved its 70 staff to larger offices in Glasgow, and recently opened in Edinburgh based in Lochrin Square, close to the city’s business quarter, largely aimed at capturing the Capital’s booming fintech sector.
“Our research shows well over 40 per cent of R&D spend is in or around Edinburgh,” adds Kent. “Plus, 17 per cent of the claims we handle are in Edinburgh.
“We know Edinburgh businesses like to work with other Edinburgh businesses, and now we have local representatives on the ground.”
While the fintech sector is a Leyton target, Dr Alison McLintock, a biomolecular engineer and manager of one of Leyton’s technical teams, points out that there are opportunities aplenty for businesses across many sectors – including farming and agriculture – to benefit.
“For example, we are working with pig farmers who are under growing pressure year on year as prices are driven down, with competition from cheap products from around the world,” says McLintock.
“Their margins are constantly being squeezed, and while some businesses are winding up, a lot are trying to maximise profit by improving the quality of their product or reducing their cost.
“However, because funding schemes are named ‘research and development’, people think of specialists in lab coats. But the reality of what R&D applies to is quite far removed from that.
“So while they are working hard on feed trials aimed at improving the quality of their produce, a lot of farmers will not be aware that this may count as R&D.
“They say ‘I’m a farmer, that’s my job to improve output, it’s what I do day to day’, or have a look and then think that it’s not for them because of the way that it’s worded or the amount of paperwork.
“We work with many of the biggest farms in the UK, supporting them through a tax relief or innovation funding process. As a result, we have highly specialist knowledge across agriculture.”
According to Kent, many businesses fall into the same kinds of traps as farmers, being unconvinced that their day-to-day work solving problems might count as R&D, being too busy to take the time to tackle funding applications, or being wary of pushing themselves into HMRC’s headlights.
“People don’t want to poke the bear and get their profile raised with HMRC,” he says. “But when people realise how it might benefit them, they get excited. The levels of return are quite high.” And Kent adds that Leyton has a specific approach.
“We say we don’t want to speak to tax people, we want to speak to the technical people and find out what they might qualify as R&D,” he says. “We don’t take what they say at face value, we work out from our point of view what we think will qualify.
“Then we go to the finance department to find out costs. We find that on average, our claims are 40 per cent higher in value than claims made by accountants through internal practices.”
Indeed, Leyton has a 100 per cent success rate in claiming R&D tax relief from HMRC, while its range of services has been extended so it can offer a holistic approach to supporting its clients without disrupting day-to-day business.
“We like to understand a company and its goals. What is getting in the way and what can help that company grow,” adds Kent. “We see ourselves as a partner for growth.”
This article first appeared in Vision Magazine. For more information visit http://bit.ly/2kt7e3W