Costs and pricing
Part of Small business grants: how to budget for costs, VAT and cash flow
Small-business grant cost checks in England: Innovate UK's £7,500 IP filing cap and 70% partner limit
Check Innovate UK grant budgets for an England small business: the 70% partner limit, £7,500 IP filing cap, staff costs, software and net-of-VAT claims.
An England small business considering Innovate UK funding should separate proposed spending from eligible claim costs. Build the budget around the applicable cost rules, rather than assuming every invoice belongs in a claim. Keep the partner allocation, evidence and cash needed to pay suppliers visible alongside each spending line.
Start with the partner-cost limit
Innovate UK's funding rules say that one partner must not account for more than 70% of a project's eligible costs. Check the allocation across the proposed partners before finalising the budget, and retain the calculation with the cost schedule so that another person can reproduce it.
Use a grant budget template to distinguish proposed costs from those accepted as eligible. Build each row around the partner responsible, the cost category, the calculation and the supporting record. Keep unresolved items separate rather than including them in the eligible total before their treatment has been checked.
Test the partner allocation after reviewing individual cost lines, not just before that review. As a budgeting method, recalculate the shares whenever you remove or amend an item. This keeps the percentage test tied to the current eligible-cost total rather than an earlier version of the project plan.
Build staff, overhead and software lines
For Innovate UK staff costs, include gross salary, employer's National Insurance, company pension contribution, life insurance and other non-discretionary package costs. List these components separately in the working calculation so that a reviewer can distinguish the salary figure from the associated employer costs and check the proposed total.
Innovate UK's labour cost guidance requires actual labour costs claimed to be supported by timesheets, project records or both for staff who worked on the project. Organise the grant claim evidence around the work being claimed, and connect each calculation to the relevant record rather than keeping an unexplained total.
| Cost line | Innovate UK treatment |
|---|---|
| Indirect overheads | Eligible if incurred directly because of undertaking the project. |
| Exclusions from indirect overheads | Do not include specific costs associated with sales, marketing, product delivery, product literature or reports. |
| Already-owned software | Where the organisation or a consortium partner already owns software used in the project, claim only additional costs incurred and paid between the project's start and end. |
For a supplier comparison, ask each bidder to distinguish existing software from additional project spending. Request an itemised quote and proposed payment timing. Keep the purchasing decision separate from the eligibility decision: assess whether the proposed cost fits the project rules before placing it in the claim budget.
Keep the IP filing cap separate
Only SMEs can claim an Innovate UK contribution towards filing costs for new IP generated by the project, up to £7,500 per SME partner. Treat this as a ceiling on that contribution, not as a promised payment or a budget for all intellectual property work.
Keep proposed filing costs distinct from other intellectual property spending in the working budget. Record which partner would claim the contribution and how the proposed filing relates to new project-generated IP. Apply a quality checklist to that calculation before treating the amount as part of an expected grant contribution.
Avoid spreading the filing cap across unrelated budget lines merely to make the totals fit. Instead, retain a clear description of the proposed filing work and the amount being assessed against the cap. Ask the reviewer to check both the cost description and the partner's eligibility for that contribution.
Work with net-of-VAT costs
For Innovate UK claims, grant funding is outside the scope of VAT and costs claimed must be net of VAT. The standard VAT rate is 20% and applies to most goods and services. Keep the tax shown on an invoice separate from its net cost.
Illustrative example: assume an eligible project purchase costs £7,500 net and carries VAT at 20%. The VAT is £7,500 × 20% = £1,500, giving an invoice total of £9,000. Under the Innovate UK net-of-VAT rule, the cost entered in the claim is £7,500, not the £9,000 invoice total.
Check costs and cash flow together, but keep separate columns for the invoice payment and the eligible claim cost. In the illustrative example, distinguish the £9,000 invoice from the £7,500 claim-cost entry. Do not treat an eligible cost entry as confirmation of the amount or timing of grant income.
Review the budget before committing
Give the reviewer a cost schedule that can be checked without reconstructing the application. Attach the partner allocation, staff calculation and relevant supporting records. Identify items still awaiting an eligibility decision, and keep those items separate from the total used to assess the proposed grant claim.
- Check that no partner accounts for more than 70% of eligible project costs.
- Support actual labour costs claimed with timesheets, project records or both.
- Check indirect overheads against the project connection and specified exclusions.
- For already-owned software, include only additional costs incurred and paid during the project.
- Check new project-generated IP filing contributions against the £7,500 per SME partner cap.
- Enter eligible claim costs net of VAT.
Test risk scenarios using the spending commitments in the current budget. Ask what you would postpone if an unresolved cost were rejected or expected funding arrived later than planned. Record the decision alongside the forecast, with a named person responsible for approving any commitment before the uncertainty is resolved.
