Funding boost for software businesses

There has been a massive boost in the number of software businesses claiming funding through R&D tax relief. The Government intends this to be a key source of funding to stimulate innovation and competitiveness for UK businesses, with over £10bn of funding provided to date

The software sector has been slow to take its share of this funding over the last 15 years but we are now seeing far more software businesses making claims than before, nearly double the number from 2 years ago.

This demonstrates not only the growing strength of the UK tech scene but also the increasing awareness of this vital source of funding which is too often overlooked.

This type of funding covers around 25% of qualifying development costs, being the running costs and salaries of the business making the claim. Claims can be made from start ups up to large companies, with significant benefits whatever the size of business.

The typical amount of funding for companies that make one or two claims is around £25,000 per year. This increases to over £60,000 per year for companies making more than 5 claims.

Larger software based claims tend to be in the games and automotive sectors but we have seen the size of claims for start ups increase significantly too, typically reflecting an increase in the number of developers. We have also seen a sharp increase in the number of smaller companies claiming this funding for their part in the R&D carried on by large companies, a feature of the region’s collaborative development and open innovation.

This funding is great for the economy, with every £1 of R&D funding provided typically triggering another £2 of investment in further developments.

The start up digital sector in particular can make great use of this funding as it can often add another few months to a development budget, delaying the point at which outside investors provide risk capital. This allows the business to develop its technology further, reducing the risk and so making it easier to raise investment for smaller amounts of equity.

Although this is a strong indication of the growing strength of the digital economy there are far more companies missing claims than making claims so we look forward to seeing both the number and value of claims continuing to grow over coming years.

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