Mastering data driven innovation with R&D tax credits

Data driven strategies are essential to modern business growth, but as businesses work hard to adapt, many face financial hurdles – can R&D tax credits help to relieve the pressure? We take a deeper look at data driven innovation and how R&D relief can be used to accelerate projects while alleviating financial burdens. 

By embracing data driven innovation, businesses are able to make informed decisions that inspire cutting edge advancement throughout their industries. While these innovations may help businesses to improve market competitiveness, the investment in advancement can be hefty.

In order to drive business success with data driven innovation, leaders must be able to continue daily operations while sourcing funding opportunities for research and development. This is where R&D tax credits may be able to provide a helping hand. 

As a form of innovation funding, R&D tax relief provides businesses with financial relief for investments made in scientific and technological advancement. 

This is how the relief works alongside data driven innovation.

What is Data Driven Innovation?

Data driven innovation is the practice of using data to improve various aspects of daily business operations. The practice generally relies on:

• Data analytics
• Artificial intelligence (AI)
• Machine learning

By embracing the insights drawn from data driven innovation processes, leaders are able to make informed decisions regarding their business, streamline operations, and even drive cutting edge advancements. 

For example, manufacturers can rely on datasets to spot a gap in industry knowledge that could optimise processes, while retailers may be able to draw on the data to develop consumer based products. 

Ultimately the process of data driven innovation can lead to the introduction of new: 

• Products 
• Processes
• Services
• Software

Adapting data driven strategies that induce innovation have the potential to accelerate industry advancements in science and technology, but they can also have a significant impact on the revolutionary businesses choosing to undergo data driven research and development.

How Data Driven Innovation Enhances Business Growth

Historically, businesses that use actionable insights as a driving force for innovation, sew the seeds of success. By dedicating time and resources to groundbreaking research and development efforts, businesses are able to effectively diversify their operations.

This is because the pursuit of innovation harnesses a variety of benefits that have a direct connection to business growth. Some of these benefits include: 

• Enhanced competitor advantage
• Greater business reputation
• Improved customer experience
• Reduction in operational costs

When combined with historic data analysis, businesses can reduce the risks of data driven innovation by forming and implementing protective measures. 

Understanding R&D Tax Credits

For businesses investing in research and development in the UK, there is a form of government support that reduces the financial burden. This form of innovation funding is known as R&D tax credits.

It works by presenting businesses with up to 33% of their eligible expenditure for their investment in research and development projects – so long as it meets HMRC’s definition. That is to say, that a qualifying research and development project is one that seeks to overcome a scientific or technological uncertainty that cannot be otherwise solved by an expert in the field. 

This means that qualifying research and development projects don’t have to involve laboratories. Projects that advance technology by relying on data processes, are also able to benefit from R&D tax relief. 

It’s important when claiming R&D tax credits, that businesses understand not only the eligibility criteria, but also the qualifying costs. These costs can include: 

• Software costs
  The software must have been used directly in research and development
• Direct staff costs
  This can include PAYE as well as NIC and pension contributions for the time staff spent working on the research and development project
• Consumable items
  This can be materials used in research and development or even some utilities that were necessary to the project development
• Collaborative work
  Businesses that choose to collaborate in order to innovate, may claim their portion of research and development costs

In order to keep track of eligible expenditure, businesses must make an effort to document every detail throughout the course of the research and development project. This will help when it comes to compiling a claim, while maintaining compliance standards. 

Enhancing Data Driven Innovation With R&D Tax Relief

Using valuable time and resources, data driven projects can quickly become quite costly, but with the strategic use of R&D tax relief, businesses can alleviate the financial burden of data driven innovation. 

Given the fact that R&D tax credits are designed to incentivise scientific and technological advancement, they provide significant financial support for data driven innovation such as: 

• Building cutting edge AI systems
• Development of data analysis infrastructure 
• Creating predictive analytic systems

Example of Enhancing Data Driven Innovation With R&D Tax Relief

In order to showcase how the R&D tax relief can help to reduce the financial burden of data driven innovation, we want to draw on a real world example by using one of our case studies.

This particular client of ours rethought the recommender systems of e-commerce businesses through an exploration of technology and psychology studies. By using AI to analyse customer data, they were able to create a recommendation as a service (RaaS) system that optimised customer experiences with bespoke recommendations.

Throughout the research and development phase of this project, our client invested a significant amount of time and money. But by working with the team at Alexander Clifford, they were able to secure £166,695 of R&D tax relief. 

This return ensured that the client was able to successfully implement their RaaS system, improving customer experience and satisfaction, and ultimately allowing the business to flourish.

How Alexander Clifford Can Help

As one of the UK’s top R&D tax credit advisories, the team at Alexander Clifford combine professional knowledge of HMRC policy with their passion for innovation, to help businesses make cutting edge advancements without facing significant financial pressure. 

Using their meticulous attention to detail, our specialists identify qualifying activities and costs that are often overlooked, enabling businesses to maximise their claims. 

Having successfully submitted over 2,400 claims on behalf of clients, our team has helped businesses claim over £83million in R&D tax credits so far. 

That’s what makes Alexander Clifford your trusted choice for R&D tax credits. 

If you’ve been investing in data driven innovation, it’s time to get started on your claim. Fill out the contact form below, or book an appointment with one of our specialist advisors.