Business Peak District - Manufacturing & Engineering Showcase - 29 th June 2015 © TBAT Innovation...

Business Peak District - Manufacturing & Engineering Showcase - 29th June 2015

© TBAT Innovation 2015

Funding for Innovation – Grants and R&D Tax Credits

TBAT Innovation Limited

Matt Symonds



Key Message For Today

There are practical sources of grant funding (free money!) for SMEs and Large Organisations looking to research and develop innovative technologies and products, and grow

Research and Development (R&D) Tax Credits are a good source of funding back into a business to enable future developments



Grant Funding

What, where, how?



Your Experience?

Who has accessed grants before?

How did it go?

Is there anything specific you want me to cover?



Introduction: grants why bother?

Free money! No need to give equity No ownership on intellectual property No claw back

Alternative? – sales? Application process not too onerous Overseas market development Provide a ‘green light’ for further investment Can stimulate collaboration Kick start a business Information for R&D tax credits



Introduction: types of grants

Consultancy- External objectivity- Reduce cost of external

help- Expertise not in house

- Technical- Financial- HR etc

- Reduce workload

Capital- Buying new equipment- Putting up a new

building- Buying new computers- Buying land and

property- Buying a business- Buying IP

R&D- Develop new products- Funds internal work- Funds external work- Funds research by

others- Funds prototypes- Funds testing



Introduction: UK/EU Landscape

Increasing: grant value, complexity, administration

UK Grants

Innovate UK SMART – SME Biomedical Catalyst Innovate UK Collaborative – themed SBRI Innovation Vouchers Local Funding – LEP/RGF

EU Grants

Eurostars - SME Horizon 2020 – SME Instrument Horizon 2020



UK Grant Funding

Main portal for UK R&D grant funding is Innovate UK (previously Technology Strategy Board - TSB)

https://interact.innovateuk.org/





UK SME grants: SMART

UK – SME focus - Grant for research and development – ‘SMART’ – administered by Innovate UK

Proof of Market – 60% of project cost fundedGrants of up to £25,000 is available to SME’s

Is there a market?

Proof of Concept – 60% fundedGrants of up to £100,000 is available to SME’s

Innovative and ground breaking ideas

Development of Prototype Grants – 35% to 45% fundedA grant of up to £250,000 is available to SME’s

R&D into pre-production prototypes



Operates an ‘always open’ application process

Next batch assessment – Thursday 14th September 2015

Batch assessments every 2 months

Application submitted online

Results and feedback typically 4 week after assessment deadline

UK SME grants: SMART



£96k grant applied for against a £215k project

12 month project to develop, prototype and clinical trial the product supported by the NHS

Development of an Innovative Portable Handheld Pupil Diagnostic Device - Pupiloscope

Case Study



Currently; Biomedical, Biotechnology, Energy & Agritech catalystsSimilar structure to SMART (3 streams)- targeted at developments in the healthcare sector4 monthly batch assessment Available for SMEs and Large companiesGrants of £100k - > £2.5m across various project types

UK grants: Catalysts



Small Business Research Initiative (SBRI)

SBRI is a mechanism which enables public sector bodies to connect with innovative ideas and technology businesses to provide innovative solutions to specific Public Sector challenges and needs.

Projects are typically 100% funded

UK grants: SBRI



Example Current Call

Non-destructive evaluation“This MOD call seeks proposals for novel ideas, innovative technologies, concepts and solutions to optimise Non-Destructive Evaluation (NDE) capabilities; particularly compact, portable and deployable solutions that improve operating capability and drive supply chain and inventory efficiencies. ”.• 100% funding: £1m pot • Deadline for applications is at noon on 19th August• Best concept demonstrations allocated further funding for

prototype development

UK SME grants: SBRI



UK Collaborative Grants

Collaboration between SMEs, large enterprises, Uni’sVarious themed calls throughout the yearNew calls coming out all the time – unpredictable!50% funding is typical from £100k to £1m+Sector focus areas – health, built environment, transport, high value manufacturing, energy, electronics / photonics, materials……



Current example:Game-changing technologies for aerospace

Projects to accelerate the commercialisation of highly innovative technologies for civil aerospaceSolutions sought for key aerospace industry challenges and for opportunities to bring in technologies and capabilities from outside the traditional aerospace sectorFeasibility studies and collaborative research and development projects acceptedTotal project costs up to from £100k to £1.5mSmall businesses funded up to 70%, medium businesses 60% and large businesses 50%Deadline for application – 16th September 2015

UK Collaborative Grants



Do’s…

Make sure you meet scope Answering the questions! Consider and detail market potential – UK,

overseas Provide evidence to back up claims Thoroughly detailed the ‘innovation’ Outline technical risk Give a full financial breakdown Detail the team and past experience Leave enough time to do a proper job! Have the cash flow to support the project…



EU grants: SME Instrument

Phase 1: Concept and feasibility assessment

Phase 2: R&D, demonstration, market

replicationInput: Idea/Concept: "Business Plan 1"

(~ 10 pages) 10% budget

Activities:Feasibility of concept

Risk assessmentIP regime

Partner searchDesign study

Pilot applicationetc.

Output: elaborated "Business plan 2"

Input: "Business plan 2" plus description of activities

under Phase 2 (~ 30 pages)90% budget

Activities:Development, prototyping,

testing, piloting, miniaturisation, scaling-up,

market replication, research

Output: "investor-ready Business plan 3"

No direct funding

Phase 3: Commercialisation

Promote instrument as quality label for successful projects

Facilitate access to risk finance

Support via networking , training, information,

addressing i.a. IP management, knowledge sharing,

dissemination

SME window in the EU financial facilities (debt facility

and equity facility)



Phase 2 R&D, Demonstration;

€1 to 2.5m grant* 70% funding rate* ~12 to 24 months

30 pages including cover page

Phase 1 Concept and feasibility

assessment; €50k grant 70% funding rate, ~6 months

Ten pages including cover page!

EU grants: SME Instrument



1. Development of in arterial catheter for early indication of sepsis

€2.4m project, 100% grant funded

UK lead, German subcontract, Hospitals UK/Germany/Spain

Case Studies – SME Instrument

2. Development of microbial fuel cell; waste-to-energy, water treatment

€2m project, 70% grant funded

UK lead, sector representation across EU: farming, food & drink



Research and Development (R&D) Tax Credits

Why and how to apply



R&D Tax Credits - SME

WHAT ARE R&D TAX CREDITS?

Applies an uplift to your R&D costs which can be used to offset Corporation Tax or claim money back from the HMRC.

RECENT CHANGES

Not limited to NI paidNow 230% uplift from April 2014, 14.5% cash backNo minimum R&D spend

IN A NUT SHELL

For every £1 you spend on R&D your tax bill can be reduced by £0.26 if you make a profit or get a £0.33 cash back if you make a loss!



2 full company tax years plus current one

Carry losses forward

Revenue costs only

1st Jan 13 1st Jan 14 1st Jan 15 1st Jan 16

Must be claimed by 31/12/16Generates Tax Repayment or extended losses

Company tax year 2 Company tax year 1 Current company tax year

What’s the timeline?

Must be claimed by anniversaryof accounts submission to generate repayable credit



CASH BACK

TAX REDUCTION EXTENDED LOSSES

R&D Tax Credits: why bother?

Uplift of R&D costs offset against company profits reducing tax payable – worth 26p in the £1

Uplift of R&D costs pushes company into loss, use to extend losses against future profitability – good for near to market R&D companies

Reviewing earlier years R&D activity, Uplift of R&D costs reduce profits in those years and create tax refund

TAX REBATE

Loss making company can claim up to 33p in the £1



Core R&D

Other R&D entitlement

Non-qualifying activities

Creating a new process, material, device or product

Design and Prototype Build

Customer Funded Work

Improvements to existing products

Duplicating an existing process or technology in a new way

Management input to project meetings

Services directly supporting the R&D project

Process Improvements

Beta type customer trials Resolving

production problems that require R&D input

Processing intellectual property

Non direct support services such as equipment maintenance, cleaning and repair

Concept and idea feasibility analysis

Design solely for cosmetic and aesthetic reasons

Activities in relation to product commercialisation (mastering production and distribution)

Addressing contractual arrangements

Marketing and budgeting for new product

Source: PWC

So what is R&D for tax purposes?



Qualifying costs

Staffing costs

Consumable items

Software

Externally provided workers (Relief on 65%)

Subcontracted R&D (Relief on 65%)

Contributions to independent research (Large Scheme)



Case Study – NHS equipment supplier• SME £10m T/O - low level R&D developing hospital ward

furniture. Looked after 50,000 NHS assets

• Worked with senior management to identify key R&D projects. Through discussion established they developed their own asset management system.

• Asset management system R&D worth x4 rest of R&D together

• We helped them claim back £116,000 in tax



Case Study – sports car racing team• SME £1.2m T/O managed fleet of 12 cars across 4 race

disciplines on behalf of pay per season drivers

• Highly complex and rule driven sport with little leeway to create technology advantage

• TBAT visited the company on trackside and head quarters. Wrote the report and did the financial analysis.

• We helped them claim back £48,700 in tax (used to offset legacy PAYE underpayment)



Case Study – SME web company• £1.1m T/O. Undertook development work for SME and

large clients, IPR ownership project specific, developed own internal software to manage their business

• Met with company, analysed labour, overhead and subcontract costs

• Devised financial model to maximise claim

• We helped them claim back £43,000 over 2 year period



Our approach

- Take the hassle out of making R&D tax claim

- Minimising impact on company time

- Multiple financial modelling to maximise claim

- We write the entire evidence report based on

short interviews

- Free initial assessment of claim value



TBAT Innovation LtdUnit 3 Bradley Court, Trent Lane

Castle Donington, Derbyshire DE74 2UT

T: 01332 819 740

M: 07795 460137

F: 0871 433 5363

E: [email protected]

W: www.tbat.co.uk

Many Thanks!

http://www.tbat.co.uk/

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