Tax relief on your R&D investment – the Dxcover story

Did you know that businesses that invest in R&D can claim tax relief?  Our financial partners CT are ideally placed to advise businesses on how to maximise this potential revenue.

Here’s how they helped one business, Dxcover – winner of the Converge Challenge runner-up prize in 2017. Dave Philp, head of R&D Tax at CT talked with Dr Holly Butler, head of product development.

So Holly, to date Dxcover has successfully claimed nearly £500,000 in R&D Tax Credits. How have you reinvested the funds and what difference has it made to the business?

Having a substantial cash injection in the bank has huge benefits. For a startup runway when a business is at an early stage, the additional funds give a bit of breathing space, extending the timeline to develop our products and also helps with essentials.

Reinvesting in developing new and current products, particularly for a medical device company like ours, has meant that the claim money for our brain cancer product helped with the development of new products such as a colorectal test. The initial investment in hardware has delivered multiple benefits, across different products.

Looking back, were there any unexpected lessons you think would be helpful for businesses claiming for the first time to know?

We made our first claim in 2019 – so it feels like a lifetime ago now. When we were offered grants, it’s very difficult to turn down free money. I don’t think we would have changed anything, but having advisers who can help understand the future implications of applying for grants and other funding is good to know. 

We invest a lot in development and I personally didn’t realise there was a mechanism to get money back. My main advice is to get your processes in place as soon as possible, to be in a position to make a claim. Timing is key – gather information on your processes and seek expert advice as soon as you can. This will help you to understand your processes thoroughly before spending a budget.

What would be your main takeaway for them to keep in mind?

Get early advice on what “qualifies” as reclaimable R&D spend as early as possible. That way you can put in place a system that tracks your spending against the correct categories. Organising the mind and using tracking to see where you are spending time and money will help to understand where it can be better spent. 

You might assume you are working on a core project all the time, but a breakdown helps to understand your true position – in our instance, are you spending it on applications or hardware development? Time is valuable, when you are ploughing away, working all hours to get your product off the ground. Understand that your time is valuable and can be put into monetary terms. Having a breakdown is so helpful, and ties in to how you can report back, ultimately understanding the financial implications of different projects. 

Any advice for the Chancellor to help other fast-growing businesses like yours?

Clarity on what we can and can’t claim against – it’s not always clear cut. Anything packaged as ‘commercialisation’ or ‘route to market’ is not suitable, but there’s such a massive overlap. Understanding of what a market is, and a route to that market is essential for growth – that’s the crossover between commercialisation and feasibility.

If you are a pre-revenue company asking these questions, a more flexible, dynamic approach to being able to take a product to market and selling it would be very helpful. I know the Government want to help businesses succeed, but it’s about the details to make this happen. Here to help with the Holly hotline if he needs any advice!

Dr Holly Butler was speaking to Dave Philp, head of R&D Tax at CT. 

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