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How Brexit could be good news for innovative start-ups

Brexit could be good news for innovation, if the Government helps make it a success. This is the view of Dave Philp, Head of R&D Tax at Chiene+Tate accountants. He says that withdrawing from the European Union will give ministers freedom and funding to incentivise new product research and development.

Currently, the UK is one of the best locations within the EU to launch a start-up business. We have sufficient tax incentives, grant funding initiatives and access to a wide talent pool. All of this supports UK companies in progressing tech innovation and advancement to push through barriers and become world-class businesses.

Does Brexit threaten innovative start-ups?

While media attention has focused on the threat that Brexit presents for innovative start-ups in the UK, it could also provide a welcome opportunity. Leaving the EU will impact some of the access to funding streams and grants, but it will mean the UK Government has a golden opportunity to switch up the way they support start-ups. They could introduce more generous measures to support start-ups through the tax system, for example.

Some grants, such as Horizon 2020, will not be available to UK start-ups should we leave the EU with no deal. UK Government guidance says that if there is a no-deal Brexit, businesses will forfeit future funding for projects that come under EU programmes. And, while the Government announced that it would honour the projects that were signed off before Brexit, there are no plans to do so after the UK’s proposed exit from the EU on 29 March 2019.

Turning negatives into positives

There’s no doubt that the one thing businesses of all sizes want is stability. And, the ongoing Brexit negotiations are shaking this. It’s likely that some tech start-ups are affected by this uncertainty. However, the most innovative minds excel under pressure, and many successful business owners turn weaknesses into strength.

For innovative, forward-thinking, cutting-edge start-ups and small businesses, Brexit is just another challenge along the road to success. The Government could attract companies focused on innovation and invention by providing R&D (research and development) tax relief. It’s a flagship incentive scheme that helps companies, including start-ups that typically make little revenue but have high expenditure levels early on.

R&D tax relief is one of the most generous corporation tax breaks provided by the Government. Designed to help businesses improve processes and invest to ensure success, it offers a tax credit of up to 33p on every pound of expenditure on activities focused on innovation. By using this effectively, start-ups can maintain a positive cash flow in the crucial early days.

Opening up opportunities for innovation

While this kind of tax relief has had a positive impact on lots of UK companies, it does have certain limitations. The tax relief complies with EU law and has been changed many times following objections from other EU member states who felt it gave the UK a competitive advantage.

When we leave the EU, the UK will no longer be bound by these restrictions on this kind of tax relief. This presents the Government with an excellent opportunity to expand its scope and add in other incentives for innovate start-ups to thrive after Brexit.

James Turner, Managing Director of Turner Little Limited says: “Brexit has caused a certain level of difficulty for some businesses, particularly those who want clarity on the final deal. However, it should be emphasised that Brexit will be a great opportunity for the UK Government to make different decisions for funding and supporting innovative UK start-ups.

“The chance to alter incentives such as the R&D Tax Relief is a golden opportunity for positive change that could completely transform the fate of start-ups in the UK. Small businesses are the backbone of the UK economy, and will be even more vital to the success of the country after we leave the EU. The Government could fuel further innovation in business and as a country we will continue to build on our excellent reputation as the perfect base for innovation.”

About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.