The British spirit of entrepreneurship and innovation is alive and thriving. According to the latest Companies House data and analysis by the Center for Entrepreneurs (CFE), 650,000 new businesses were registered across the UK in 2016. This was a record high after 2015’s 618,000 records. The growing number of startups across the country suggests that entrepreneurs are optimistic about the economy and can see opportunities to grow.
London retains its position as Europe’s startup capital, and universities are churning out creative professionals and groundbreaking research papers in science and technology. According to an interactive map from StartUp Britain, 30% of all new startups in the past year were registered in London. Compared to its closest rival in the startup space, Berlin, London has 60% more startups, lower corporate taxes, and a 60% higher value for the startup ecosystem.
Meanwhile, businesses are pouring money into research and development to help them gain an edge in an increasingly global and competitive world. According to the Intellectual Property Office (IPO), 22,809 patents and 54,320 trademark applications were filed in 2015. The IP ecosystem has nearly doubled over the past 17 years, and there are more UK-based applicants for IP, trademarks, and licenses than ever before. The UK is now ranked as one of the biggest markets for intangible assets globally, and the IPO believes that this is unlikely to change, even as the UK leaves the European Union in the next few years.
The UK government is keen to sustain the country’s position as a science and technology leader. Part of the government’s contribution to innovation in Britain is the tax credits offered for R&D expenditure. Since its introduction in 2000, an increasingly larger number of businesses have been claiming tax credits to offset the costs of their R&D expenses.
The program has proven to be a massive success. The number of claims filed for Tax Credits in 2015/16 grew by 22% over the previous year. Meanwhile, the government is keen to expand the program. By 2027, the Prime Minister hopes that 10% of all R&D investments in the country are indirectly funded by the government and that the level of R&D is raised to 2.4% of the country’s GDP.
However, experts believe that millions of businesses are missing out on these incentives. Tax claims are still underutilized, and part of the problem could be processing times.
Reports by the House of Commons Select Committee and the Science and Technology Select Committee suggest that the government needs to keep up with the pace of change in technology and science.
Investing in new innovations is risky and fast-paced. Meanwhile, the government’s tax credits are part of the Corporation Tax system, which means they can only be paid out once a year. The government has said that 82% of these claims from SME businesses are delivered within 28 days or less. So the wait could be longer for larger organizations.
While the government has implemented a procedure for SME businesses to claim Advanced Assurance and is trying to shift payments to a quarterly schedule, the process is still woefully slow for many innovative enterprises across the nation.
Companies that innovate the most require a quicker system. A more effective program for filing new claims for long-term investments can dramatically reduce the risk for such companies. By eliminating the risk and speeding up the process, companies are empowered to take chances and be more innovative. Companies can speed up the process of claiming tax credits for R&D expenses by using specialized online tax platforms and bespoke consultancy services.
Speeding up the Process
Although there’s little that businesses can do to spur the government’s pace of reforms, there are ways to quicken and improve the process of filing claims for R&D tax credits. Large businesses can deploy specialized software and hire professionals to maximize the returns from these credits. SME businesses can use bespoke online platforms such as Tax Cloud to make the process faster, easier, and more efficient.
The UK is still one of the most resilient hubs for startups and innovative businesses. The government’s efforts to support innovation by offering grants, incentives and clear legislation are helpful, but the system remains inefficient and slow. With the help of these tools, businesses of all sizes can eliminate errors and discrepancies in their claims. A robust and correct claim is likely to move through government bureaucracy at a much quicker pace.