finance focus

from Business Edge 63

by Distinctive Media Group Ltd

construction

Can you make innovation in sustainability financially viable in the short term?

COP26 is just around the corner and innovation in sustainability is very much on the agenda.

You only have to see some of the recent announcements such as:

Phasing out new Diesel and Petrol Cars by 2030

Shell installing a network of 50,000 of accessible on-street and on forecourt EV charging points across the UK, through its recently acquired Ubitricity business.

The Highways agency using Graphene in asphalt to enhance the durability of road surfaces and extending the periods of time between maintenance.

It’s the little things

We’ve been trying to work out how to make our tax consultancy more “Sustainable” in the longer term. The pandemic advanced some of those plans with MS Teams and Zoom replacing face to face client meetings and to keep interacting with our customers, so perhaps in a way, we have stumbled into being slightly more sustainable. However, we will be getting back to some “in person” meetings and try to get the right “mix”.

It’s difficult not being on a client’s premises, certainly when it comes to the engineering and manufacturing sectors that we support with Research and Development Tax Credit claims, being on site gives you a feel for what’s going on and we can ask questions based on what we see, hear and feel, generally speaking the potential to claim and also the value of the claim increases.

Sustainability doesn’t have to be expensive, it doesn’t have to be huge grand gestures, it will be the sum of all of the little changes that we make in both our personal lives and in business that will be greater than the whole.

The bigger projects can get support

There are a number of competitive grant schemes that have sustainable elements at their core, you only have to check out UK Research and Innovation (www.ukri.org) where there are over 100 opportunities for business funding, granted not all of them are focused on sustainability but there will be a significant number.

Then there’s research and development tax relief. If you are lucky enough to have successfully received a grant, you may be somewhat surprised to hear that you could also benefit from tax relief for spending the grant money. You can claim under the RDEC scheme as an SME for the grant funded projects or as a large company for funded or your own innovation projects. The tax benefit for money spent since 1 April 2020 will generate either a tax rebate or a cash injection of up to 10.53% of the eligible costs.

If you are a small company and you either didn’t apply for a grant or weren’t successful in your application, but have decided to go it alone regardless then you could in fact be in line for an even greater cash injection for a loss making company of up to 33.35% of your eligible spend, if you are profitable, it will reduce your tax liability by up to 24.7% of the eligible spend.

The last way the government can help is through Patent Box. If your new product is so ground-breaking that you are looking to Patent it and are successful in being granted a patent, you could reduce your tax bill further, as a result of the profits being generated on the sale of the items being taxed at a reduced rate of 10%.

As we move towards the end of 2021 and in to 2022, we are able to help you with all of these aspects of funding for innovation, as we have grown our business relationships to include an innovation grants funding expert to our existing family of services, which already focus on R&D and Patent Box.

In the meantime, one of the things that we have already been doing is offering a reduction in our fees for companies that are developing green technology, sustainable agriculture and renewables. We’ve worked with a few companies this year and are looking to find and support more businesses that are working in these high value areas that will help all of us to be a little more sustainable in our lives. If you would like to have a chat to determine whether you have an eligible project, sustainable or not then you can book a 15 minute call with our director, Simon Bulteel at www.calendly.com/simon-bulteel.

Entrepreneurship and Leadership

The journey of an entrepreneur business owner can be a daunting one. It’s vital from the outset that you set the business up correctly and have an idea of where you want to take it, along with considering the organisational structure to maximise profitability and reduce risk.

Getting started

Now, you have done the hard part of coming up with an idea that is going to make you millions, the next question is how you are going to structure the business. Firstly, you need to consider what business vehicle you will use, should it be a:

a) Sole trader

b) Partnership

c) Limited company

d) Limited liability partnership

Each option will have their own advantages and disadvantages depending on your circumstances and how the business is expected to evolve. Be sure to take professional advice on which is best for you.

Strategy and forecasting

You should have a plan for where you want to take the business, commonly known as a ‘business strategy’. As part of this process we would recommend preparing forecasts for at least two years ahead, and reviewing the businesses Management Accounts on a monthly basis to allow you to compare actual results against your projected targets. With the correct reporting to hand you will be able to drill down into positive and negative trends and make the appropriate business decisions to maximise profitability.

Organisational structure

It is important that you have the right people in place to manage and lead the business, whether that be you, or a team of dependable staff that can report back to you on a timely basis. The organisational structure that you decide upon will be key to allowing you to achieve your targets and goals, and with the correct team, business and financial risk will be minimised. There are a lot more considerations to take into account, and if you require any further advice or would like to discuss an idea that you have please feel free to call 01892 784321 or visit