Grants: the benefits to your business

This post is part of our Entrepreneurial team’s regular series of blogs.

Grants are available on a wide range of business activities, providing funding that can enhance research and development, regional assistance, environmental aid and much more. Grants provide financial support to an entity to cover a percentage of eligible expenditure incurred on a project.

The percentage and nature of the eligible expenditure will be determined on a grant-by-grant basis and will be set out in an offer letter. Two of the most common grant-giving bodies for Scottish businesses are UK Research and Innovation (UKRI – commonly seen as Innovate UK) and Scottish Enterprise.

The incentive

Grants are a great way to reduce the net outgoings on research and development projects of a business. Grants aren’t limited to businesses with a primary function of research and innovation or businesses at early / pre-revenue stages, so they can be used by more mature businesses undertaking projects which meet relevant criteria from grant-giving bodies.

The considerations

Grant funding is generally set at a percentage of eligible expenditure up to a maximum amount, but may also include a minimum eligible cost expenditure. Consideration should be given to the cashflow impact on the business of seeking and accepting grant funding. Whilst a percentage of costs will be covered under the grant funding it is rarely 100% of the expenditure. Receipt of grant funding is likely to occur following a quarterly submission and expenditure has to be defrayed in the period, creating a cashflow timing difference that will need to be managed.

If the business is claiming R&D Tax Credits these could be impacted depending on the nature of the grant. It is always worth speaking to your tax advisor at an early stage of the process as the financial impact to the business may be more complex than the expenditure on the project less the total grant receipts.

The reporting requirements

Typically claims are submitted on a quarterly basis to the grant-giving body. As mentioned above, the terms of what qualifies as eligible expenditure is set out in an offer letter along with total expected eligible expenditure. The total value of the grant will determine how often an Independent Accountant’s Report needs to be submitted to the grant-giver. Frequency of reports can range from each quarterly grant claim to only being required for the final claim. It’s important to check what the requirements for Independent Accountants Reports are to avoid a delay in receiving funds.

The help

Our audit team have extensive experience providing Independent Accountant’s Reports on grant claims to meet your obligation under the grant terms.

Maybe your business has recently received grant funding for the first time and you would like support to create systems to monitor the spend on the project, which feeds into the submission to the grant-giving body. We’re adept at being able to provide solutions to reduce the administrative burden on businesses of record keeping in a tailored and logistical manner.

If you have any questions, please contact our Entrepreneurial team.

Jackie Fraser blog – how Scotland’s tourism sector can reopen after lock down

Tourism is one of Scotland’s most important and fast growing sectors contributing over £11bn to the nation’s annual GDP. Last year it employed around 218,000 people accounting for more than eight per cent of total Scottish employment. In 2018 total overnight tourism trips in Scotland reached 15.5 million, a rise of three per cent from the previous year. At a time when stay at home holidays are increasing, partly due to pandemic-related foreign travel restrictions, it’s worth noting that UK residents already account for 12 million of those trips.

After the traumatic impact of the Covid-19 lockdown, the sector is now eagerly awaiting the opportunity to reopen for business on 15 July. While social distancing measures will put a limit on the scale of reopening, those who run tourism businesses are hoping it will enable them to generate at least some revenue, which could make the difference between survival and closure.

Many tourism businesses in Scotland and across the UK have seen a raft of support and assistance offered to them as a result of the effects of the pandemic. As 15 July approaches, they must now consider how their cash flow has been impacted, and is likely to be further affected by recent financial highs and lows.

They will need to determine whether they have suitable short-term cash reserves to pay employees and suppliers after the financial drain incurred since March, or whether borrowing is required. If this is the case, businesses must then decide if they are comfortable with the level of debt burden incurred and the impact this will have going forward.

The UK Government VAT deferral scheme, which enabled businesses to postpone three months of VAT payments to 30 June, has provided some help with cash flow. Those businesses which grasped this opportunity by cancelling their VAT direct debit for that period will now need to reinstate this or could risk running into VAT arrears going forward.

The industry is also set to benefit if the strong rumours of a reduction in VAT come to fruition. While not yet confirmed, there have been reports the Chancellor is considering reducing the standard rate from 20 to 17.5 or possibly 15 per cent later this summer which would be a welcome development in improving cash flow for businesses within the sector.

Tourism businesses provide a lot of jobs and many will need to consider employment issues in advance of the 15 July reopening. This includes determining when existing employees should be taken off furlough, or when new people need to be hired. Another important issue for tourism businesses is how they will ensure they are able to safeguard their employees’ health and follow new government health and safety guidelines.

The tourism sector also provides a living for a significant number of self-employed people, some of whom will not be able to return to work in mid-July. There is, however, support in place for these workers as the UK Government recently announced the extension of the Self-Employment Income Support Scheme (SEISS). Qualifying individuals can continue to apply for the first SEISS grant until 13 July and claim a taxable grant worth 80 per cent of their average monthly trading profits. This is paid out in a single instalment covering three month’s profits capped at £7,500 in total. Applications for a second grant will open in August, with qualifying individuals able to claim a further grant worth 70 per cent of their average monthly trading profits capped at £6,570 in total.

These government schemes have been essential in supporting the businesses and people driving the economic success of Scottish tourism. While this will be a hugely challenging year for many, the 15 July reopening of the sector is hugely welcomed and anticipated. It is essential that businesses are suitably prepared to make the most of this year’s limited trading window so they can survive the financial blow of the pandemic and build for the future.

Self Employment Income Support Scheme (SEISS) Details

Self employed individuals are not eligible for the Coronavirus Job Retention Scheme, where the Government committed to pay up to £2,500 each month in wages of employed workers who are furloughed during the outbreak.

The Self Employment Income Support Scheme (SEISS) is intended to bring parity for self employed workers. SEISS is the Government scheme to support individuals who are self employed, or members of trading partnerships whose businesses have been adversely affected by COVID-19.

Eligible individuals can claim a taxable grant worth 80% of their trading profits, up to a maximum of £2,500 a month, or £7,500 in total (equivalent to three month’s profit). It will be available for 3 months, but may be extended. To find out more about the scheme, who is eligible, how to apply and recommended next steps download our SEISS Briefing.