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Pump Priming Innovation The UK: A Great Place to Innovate R&D Grants Pump Priming Innovation SEIS/EIS Gets things started R&D Tax Credits Rewarding Innovation Patent Box Rewards Commercialisation

SEIS and EIS – Equity Funding For early stage companies Offers 50% tax relief to investors who buy new shares in your company Capital Gains Tax (CGT) exemption on gains from SEIS investment Maximum of £150,000 through SEIS investments For small, high-risk companies Offers 30% tax relief to investors who buy new shares in your company Raise up to £5 million each year and a maximum of £12 million in companies lifetime Investment must be made within 7 years of companies first commercial sale

An intro to the UK/EU Funding Landscape SME Instrument Fast-Track to Innovation (FTI) Future and Emerging Technologies (FET) Shift2Rail Smart Grants (formally Open Grants) Innovation Loans ISCF (Industry Strategy Challenge Fund) Themed Competitions Involved with outside organisations to provide funding e.g. Network Rail SBRI Competitions

Target Areas for Grant Funding Innovate UK – Industrial Strategy Challenge Fund

Innovate UK: Smart Grants: April 2019 R&D Funding for disruptive innovative projects in any industry sector Innovation leading to new product, process or services A strong and deliverable business plan Clear & anticipated growth impact leading to significant ROI Projects must demonstrate: Closing Date: 24th July 2019 Feasibility Studies (including market research) Industrial Research Experimental Development Projects can focus on:

Market/fundamental research Experimental development Innovate UK: Funding Rates 100% success rate 79% success rate Applicant business size Market/fundamental research Feasibility Studies Industrial research Experimental development Micro/small Medium Large 100% 70% 60% 50% 45% 35% 25% Research and Development Funding 30th November 2017 8

Funding Timeline e.g. Innovate UK – Smart Grants: April 2019

Wider UK Funding Research, Development & Technology Funding 8 Challenge Statements Complete a R&D Challenge Form Invite to interview Benefit: Some cash Access to market Work alongside Network Rail Access to test facilities SBRI First of a Kind (FOAK) Previous Rounds: Round 1: Demonstrating tomorrow’s trains today Round 2: Customer experience in stations & decarbonisation Round 3: Resilience, freight, noise & environment Competitions ran by Innovate UK

Wider UK Funding Rail Safety and Standards Board Ltd Data Sandbox+ £650,000 available To deliver innovative data-driven solutions to key operational performance challenges in the rail industry Closing Date: 5th July & 2nd round due to open 2nd September Shift2Rail Joint Undertaking (S2R JU) 5 focus areas – Cost-efficient and reliable trains Advanced traffic management & control systems Cost-efficient and reliable high capacity infrastructure IT Solutions for Attractive Railway Services Technologies for Sustainable & Attractive European Freight Run via Horizon 2020 calls

Wider UK Funding Local Enterprise Partnership (LEP) Funding Open Call Innovation Focus Areas 1. Assistive technology for rail staff - innovative solutions to work in combination with existing railway security measures and the ‘See it, Say it, Sorted’ campaign to detect unusual behaviour. 2. Screening Train Carriages - There is a need for a device that is able to scan train carriages and determine if any foreign objects have been left behind. Local Enterprise Partnership (LEP) Funding

Grant Funding Top Tips Read and understand the competition criteria Attend briefing event and register interest Agree a costed and expanded plan ASAP Get partner commitment early Answer all questions and bullet points Leave plenty of time for writing, review and uploading

TBAT Case Study Grant Awarded from Innovate UK: £1.2 million Specialist business involved with the remote monitoring of bolted assets in rail infrastructure. Industrial Research – remote-condition monitoring technology for voids, noise impact & switch movement at Switches & Crossings Feasibility Study – using safety critical fastener management technology in energy & power generation industries Development and demonstrator of ‘Smart Washer’ technology to alert for preventative maintenance at Switches & Crossings Grant Awarded from Innovate UK: £1.2 million Accelerating Innovation in Rail 3 First of a Kind (FOAK) Accelerating Innovation in Rail 5

What are R&D Tax Credits? The R&D tax credit scheme is a HMRC incentive designed to inspire innovation & increase spending on R&D activities by companies operating in the UK.

The 2 different R&D Tax Credit Schemes Less than 500 employees or less than €100 million turnover. Benefit of £26 per £100 on R&D if profit making Benefit of £33 per £100 on R&D if loss making Claims can go back 2 full years Over 500 employees or more than €100 million turnover. No minimum R&D spend No upper limits on claims Benefit of £9.70 per £100 on R&D

Or, Benefit of £5,200/R&D Costs of £20,000 = 26% How does the SME scheme work? No R&D Claim With R&D Claim Turnover £100,000 Costs £50,000 R&D Costs £20,000 Net Profit £30,000 R&D Uplift @ 130% £26,000 New NP for Tax £4,000 Tax @ 20% £6,000 £800 To take home £24,000 £29,200 Benefit £5,200 Or, Benefit of £5,200/R&D Costs of £20,000 = 26%

R&D Tax Credits: The Timeline 31st Dec 19 31st Dec 16 31st Dec 17 31st Dec 18 Must be claimed by 31/12/19 Generates Tax Repayment or extended losses Company tax year 2 Company tax year 1 Current company tax year Must be claimed by anniversary of accounts submission to generate repayable credit 2 full company tax years plus current one Carry losses forward Revenue & Intangibles costs only

R&D Tax Credits: Why Bother? Uplift of R&D costs offset against company profits reducing tax payable – worth 25p in the £1 Reviewing earlier years R&D activity, Uplift of R&D costs reduce profits in those years and create tax refund. Carry losses backwards Loss making company can claim up to 33p in the £1 CASH BACK TAX REDUCTION EXTENDED LOSSES TAX REBATE Uplift of R&D costs pushes company into loss, use to extend losses against future profitability – good for near to market R&D companies

What is R&D for tax purposes? Activities that seek to: Achieve an advance in overall knowledge or capability in the field of science or technology and Resolve scientific or technical uncertainty

R&D Tax Credits: Are we eligible? You are likely to be eligible to claim if you are working on:

What is R&D for tax purposes? Prototypes Test Rigs New Device New Process The Lab Coats

What is R&D for tax purposes? Prototypes Test Rigs New Device New Process Customer Funded work First in Class R&D for Production issues Technical Process Enhancements Beta Trials Project Management Management Input to R&D Product Improvements Duplicating Existing Products in a new way Prototype Tooling The Lab Coats The Engineers

What is R&D for tax purposes? Prototypes Test Rigs New Device New Process Customer Funded work First in Class R&D for Production issues Technical Process Enhancements Beta Trials Project Management Management Input to R&D Product Improvements Duplicating Existing Products in a new way Prototype Tooling The Lab Coats The Engineers IP Processing Rent, Rates, Depreciation Concept and Idea Analysis Cosmetic and Aesthetic Work Marketing & Product Launch Costs Finessing Production Issues The Marketers

Project Life Cycle Initial Technical and Commercial Research Initial Prototyping and Technical Effort Core Development Effort Roll-Out / Commercialisation Project Progression Cost Area under graph line represents proportion of total costs that are eligible for R&D Tax Purposes

R&D Tax Credits: What can be claimed?

R&D Tax Credits: Eligible Rail Activities

R&D Tax Credits: IP Ownership You have completed R&D work for a client. To work out if you can claim, you need to answer 2 questions… What is the size of your client? Your Client You You can claim R&D Tax Credits via SME Scheme! No claim to be made. SME Large You can claim R&D Tax Credits via RDEC Scheme! Who owns the IP?

Worked Example - SME

R&D Tax Credits Top Tips Consider work you have completed for clients Compliance with legislation can still lead to innovation Have you installed new production lines? You can still claim R&D tax credits if your project was grant funded Not all accountants understand the subtleties of the scheme

Case Studies: R&D Tax Credits

Patent Box A cash resourced company innovates and creates IP A reduction in Corporation Tax on profits from patented inventions Can reduce Corporation Tax to 10% Elect for Patent Box within 2 years of accounting period UK and EU Patent Office + other EU Economic Area Products and Processes that are patented A cash resourced company innovates and creates IP

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Sam Stephens | Director | 01332 819740 | info@tbat.co.uk TBAT’s Success Our consultants work tirelessly to maintain our impressive success rates; allowing our clients to stay competitive in their sector and continue to innovate!! Sam Stephens | Director | 01332 819740 | info@tbat.co.uk

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