Leyton on how companies can grow through R&D tax credits
Potential funders are generally more cautious during uncertain times than those of stability.
Due diligence is now more time consuming than usual and experts have highlighted the fact that many innovative businesses in Scotland could be missing out on a vital source of financial support available through the research and development (R&D) tax relief scheme.
Established to fuel growth by encouraging innovation and rewarding companies for undertaking research and development work, companies can secure tax benefits in the form of a payable credit or relief against Corporation Tax liability. It is also important to note that loss-making companies are also eligible for a cash credit.
Leyton, a firm of global innovation funding specialists, partners with businesses to guide them through the process of claiming R&D tax relief in the UK from HM Revenue and Customs (HMRC). In order to meet the distinct needs of their clients, Leyton has built teams of experienced technical consultants with expertise spanning a range of sectors including life sciences, engineering, software and architecture.
After opening their first office in Glasgow in 2015, this year the business expanded to Edinburgh and now has a team of more than 80 in Scotland. Leyton achieved £250 million worth of benefits for their UK clients last year, of which £30m was delivered to the 1200-plus Scottish businesses they represent. Leyton’s Scottish division is set to more than double that figure to £66m this year.
James Marden, who manages the commercial side of the business from Leyton’s Glasgow office, explains their work by saying: “We work with our clients to address their challenges and help them take advantage of solutions that allow innovation to continue and develop. We are a strategic partner in the evolution and growth of our clients. The most effective way for our clients to identify qualifying activity and cost is through peer-to peer conversation.
“That’s why we employ technical experts in a variety of sectors. They speak the clients’ language and get under the skin of their business.”
Reflecting the domestic economy, Leyton focuses on engineering, software and, increasingly, life sciences in Scotland. The solutions they offer generally fall within tax relief and funding, however they also offer employment law services through their associated legal business, LexLeyton.
“From a tax perspective, the core focus for us is usually R&D tax credits”, comments Marden. “It allows companies to claim back a portion of qualifying costs. Such costs are usually comprised of time and resource spent in developing new technologies, improving processes or taking on technically challenging work where there is a degree of uncertainty. The scheme allows businesses to access either a payable cash credit or gain an offset against future corporation tax liability.”
Another offering which Marden says is becoming more popular in Scotland is Patent Box. This allows companies to apply an effective 10 per cent rate of corporation tax on profits from patented products. Marden says that the scope for R&D tax relief, which has been available in the UK for almost two decades, broadens every year, allowing more organisations to access this type of funding.
“About £4.5 billion was claimed in the UK during the last complete year for which statistics are available for R&D relief,” explains Marden. “It makes sense for the government to incentivise some of the incredible businesses which are developing new technology and encourage manufacturing to stay in the UK rather than go elsewhere.”
But it is not always straightforward for businesses to establish what type of relief is available and access this benefit. This is where Leyton can help by taking the legwork away from finance and technical teams, allowing them to focus on their core business.
Marden adds: “Often the term R&D can be quite misleading and conjures up the misconception there has to be labs and test tubes involved. We support clients across all sectors carrying out work that answers a technical uncertainty, creates an advance in the market or represents something new the company has never done before.
“A big challenge is time – especially if you’re a business in a high-growth phase. Many businesses don’t have the bandwidth to take a few weeks out to dedicate to filling out forms and writing paperwork, particularly when they are not 100 per cent sure that what they are doing is what HMRC is looking for.”
To find out more about Leyton, visit their website.
This article first appeared in the Vision supplement in the Scotsman – see it in full here.