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How Research and Development (R&D) can Aid Innovation


The importance of innovation has been a constant and familiar message from policymakers and business leaders for many years.

But What is Innovation and What Role does Research and Development (R&D) have in it?

Innovation can be defined as any new idea or improvement that brings commercial value. It can range from a new or improved product to a new way of delivering a service or a new or improved process that makes a business more efficient.

Older established businesses may have been doing the same things the same way for many years, achieving a low but steady growth that satisfies the business owners. But a failure to innovate can leave them vulnerable to new disruptors in the market – what’s happened to some of our familiar high street stores is a good example. Conversely a willingness or hunger to embrace change can lead not just to survival but new opportunities for higher growth.

For many businesses, without R&D there can be no innovation. This is particularly true of businesses in sectors such as technology, the life sciences and manufacturing where bringing new products to market is key to growth. Yet shockingly report after report has shown that the UK spends less on R&D than its major competitors. In the Government’s recent Autumn budget announcement, Rishi Sunak touched on the idea of the UK becoming more innovatively, technologically and scientifically competitive in comparison to our OECD counterparts.

Governments have put a lot of effort in recent years into encouraging more R&D spending and innovation among businesses. The UK Government’s R&D tax credits are designed to encourage companies to develop advances in science or technology that relate to their business. Both large and small companies can qualify for the relief, and the project doesn’t have to have been successful to qualify.

In a world where technologies and skills are constantly changing, being successful means being at least abreast of the change – or better still, leading it. To achieve this means being first with the new ideas – and doing that takes research and experimentation, and the development work that turns a great idea into something of commercial value.

But how can R&D tax credits boost R&D activity?

Matthew Jones, managing director at LimestoneGrey, commented,

‘Research and development (R&D) tax credits were created by the Government in 2000 as a form of corporation tax relief available to limited companies.

Their purpose is to reward past R&D efforts and incentivise continued development work. By offering the relief the Government seeks to foster a culture of innovation which in turn should promote economic growth.

Since their inception R&D tax credits have continued to get more and more generous. They work by rewarding qualifying companies with a substantial cash repayment or corporation tax deduction.

Companies can claim back up to 33p for every £1 spent on qualifying research and development activity, tax free cash that can be used to support future activity.’

Visit the LimestoneGrey website for more information on R&D tax credit relief.