Why R&D financial aid is more confusing than ever for small business owners

Alarming conflicts in whether the purpose of R&D financial aid is to foster economic return in projects or to promote only scientific or technological advancement is severely muddying the waters for small business owners.

R&D tax credits, the Telegraph reported today, are intended only for scientific and technological advancement and not for projects that will generate sales income. But R&D grants will only be awarded to projects that can prove they will benefit the economy and have a financially viable outcome – this shift in policy happened last month, the Guardian reported.

HMRC documents regarding R&D tax credits seen by the Telegraph stated: “Where there is the prospect of generating sales income (as is the case for expenditure on the production of goods or services), then there is no policy case for providing enhanced tax relief.”

But, as the Guardian highlighted, the grants councils shifted their focus so that any R&D project with a chance of winning finance ‘must describe the economic impact of the work they want to conduct. The councils define impact as the "demonstrable contribution" research can make to society and the economy.’

So what are small business owners to do? Focus on research projects with no economic impact in the hope of getting tax credits? Or become more bloodily business-minded so they have a chance at getting a grant on the basis of the money they can churn out at the end of the project?

This is a really abysmal conflict of interests that’s only making both processes more confusing for companies carrying out R&D. It’s trapping the companies that most need assistance between a large rock and a very hard place.

We’d like to say that at least this means if you don’t get one, you should get the other – either you’re project is financially viable and you’re more likely to get a grant, or it’s not and you can apply for tax credits. But when the government can't even sort out what it wants to give financial aid on the basis of, who knows?

With mixed messages like this flying about, the promise of reducing red tape for small businesses and making things more transparent seems sorrowfully like it was just more empty rhetoric.

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