Indeed, black swan events and crises have often been a catalyst for innovations that have changed the world. Many companies that are now household names like WhatsApp, Instagram, Uber and Slack were founded during or in the immediate aftermath of the global financial crisis, with forward-thinking business leaders looking to forge a new path through an unfamiliar future.We may one day look back at the current situation in the same way. While innovation may seem like a luxury for many businesses, many of which may be focused on immediate survival amid a widespread cash flow crisis, innovation should not be overlooked as a direct solution to this challenge. Food wholesalers that have begun selling directly to the public have created new avenues for cashflow by taking an innovative approach to their supply chains. The same goes for theatres and galleries that have made performances and collections available online – across the economy, innovation is a vital tool to keep the cash coming in. The coronavirus crisis is also notable for the scale of the support provided to businesses by the Government. Hundreds of billions of pounds have been offered to businesses to support cash flow, and the Coronavirus Job Retention Scheme (furloughing system) has been widely used across the economy to stave off the risk of long-term mass unemployment. However, the ambition of these schemes has not always been matched by effective implementation – there have been severe difficulties for many businesses trying to access funds quickly. This links to another area where innovation can act as a real boost to cash flow. The Government has initiated schemes to support cashflow for businesses since long before the crisis, and many of these schemes have been significantly underused. In particular, businesses across the economy may be able to access significant cash through R&D tax credits. R&D tax credits are designed to support businesses making advances in science and technology in order to encourage innovation. However, in practice, a huge range of businesses in sectors covering anything from agriculture to dentistry are actually eligible for tax relief through this scheme.
Our own clients, which are mostly SMEs, have been able to claim back an average of £78,000 per year through R&D tax credits. Importantly, HMRC has been processing claims and issuing the relief at a faster rate than ever during this pandemic.Faced with delays in other support schemes, businesses should be looking into all options to support cash flow. For those that have shifted to new ways of doing business in response to the pandemic, this innovation is directly key to keeping business going and supporting cashflow. However, even for those businesses that are limited in how they can adapt in the short term, the Government’s support for innovation through the R&D tax system can still make a real difference in helping businesses get the cash they need at a time when this is perhaps more crucial than ever before.
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