The UK is home to a thriving healthcare industry, that partners medical intervention with tech advancements to help people across the globe live healthier lives.
Having developed the Oxford/AstraZeneca COVID-19 vaccine just last year, there’s no overstating the impact that our small nation has had on the wellbeing of the world.
Our island’s influence on healthcare is well-recognised, with many leading Medtech manufacturers from overseas basing head offices and subsidiaries right here on British soil.
With a strong foundation built on SMEs around the country, the UK’s Medtech sector generates an annual turnover of around £22 billion each year.
For this success we can thank our dedicated researchers, developers, and investors, who aren’t afraid to face up to the trial-and-error nature of innovation. To maintain the UK’s Medtech reputation, there are a few ways in which the government has incentivised R&D by reducing the capital risk that comes with it.
In this blog, we’ll be focusing on one system available to UK-based Medtech SMEs; R&D Tax Credits.
What are R&D Tax Credits?
R&D Tax Credits were introduced to offer financial reward for innovation that’s previously taken place. After their first financial year, R&D Tax Credits offer startups and SMEs that have spent money on building their project the chance to claim back up to 27% of that capital.*
This substantial chunk of cash opens the door for game-changing re-investment into the growth of your Medtech startup. Better yet, every penny you receive back is guaranteed upon approval, non-dilutive and non-repayable.
That’s right, you can raise funds without racking up interest or sacrificing equity. And it’s as easy as filing a claim to HMRC.
Before letting you in on how you can smoothen the application process, let’s outline the two schemes that make up R&D Tax Credits.
The first, and more popular scheme is the SME Scheme. This route is aimed at companies with:
· Less than 500 employees;
· Less than $86M in gross assets;
· Less than $100M in turnover.
Within this, your business’ financial position at the time of filing determines how much money you can claim back.
Loss-making companies are entitled to claim 27% of total R&D eligible costs, which is paid directly, in cash, into your bank account.
Alternatively, profit-making companies can be awarded up to 21.5% of total R&D eligible costs, this time in the form of a tax credit.
Exceeding the metrics of the SME Scheme makes you eligible for the RDEC Scheme, which allows 20% of R&D costs to be reclaimed (subject to corporation tax).
Let’s pause there – that’s a lot of information to take in.
Here’s an example of how R&D Tax Credits can benefit Medtech innovation:
You’re in the early stages of developing an app that connects users with on-demand counselling from licensed mental health practitioners.
You’ve spent £130k over the past financial year on R&D, and you’re not yet turning over profit. By filing a Tax Credit claim, you could receive a cash sum of £42,900.
This is exactly the boost your business needed to grow, scale, and start profiting.
How do I file a claim?
As you can only claim an R&D Tax Credit in line with your financial year-end, it’s vital to work with an R&D Advisor that’s going to get you the maximum benefit possible.
For generating and submitting your claim, some advisors charge hefty fees of up to 20% of your claim size. Others might charge you upfront fees, only to have your claim rejected by HMRC.
R&D Tax specialists at Claim Capital choose to work on the side of startups.
Claim Capital can complete your R&D Tax Credit claim for a Fixed Fee of £3,000, that’s only paid upon success.
R&D Tax Credits propel healthcare startups
All avenues of R&D require a lot of hard work and perseverance. But the legislation, regulations and clinical trials involved in Medtech R&D make this journey an even lengthier one.
R&D Tax Credits provide a springboard for UK healthcare innovation, providing a financial safety-net for existing projects, and encouraging first-time founders to take the leap.
The average R&D Tax Credit claim for Medtech companies is £68,000 per year, and industry advancements mean that claim values are always on the rise.
In 2019-2020, 82,950 businesses raised funds by taking advantage of R&D Tax Credit claims.
If you haven’t already, why not join them?
*These are the updated figures in line with the new legislation announced in the April 2023 Spring Budget.
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