R&D TaxEway Will Help Reticent Tech Companies Claim Cash

Young UK tech companies don’t know how good they are and as a result are missing out on opportunities to engage with US clients and gain access to millions of pounds of UK government support, according to David Gill, Director of the high tech incubator St John’s Innovation Centre. He is launching R&D TaxEway – a simple questionnaire to help them claim back thousands of pounds – at the Cambridge Enterprise Conference ‘Diving with Dolphins’: Navigating International Waters.’  

“Many smaller companies are so overshadowed by the blue-sky research coming out of universities that they underestimate how innovative their ideas really are,” says David Gill. “Our technologists are just too modest! They are not bullish enough on the international scene and are also missing out on valuable R&D tax credits which could provide a significant cash injection.” 

Technology and innovation management expert Steve Bone, Co-Founder of Cambridge-based nuAngle agrees. Many of his clients are large US corporations hungry for technology that will gain them competitive advantage, and the Cambridge ‘brand’ helps him win business in North America. 

“US companies continually scan outside for solutions to problems as part of their technology management processes and the UK is seen as a good place to gain fit-for-purpose technology. We have been able to source world beating solutions from the UK, and Cambridge in particular, but some tech entrepreneurs just don’t sell themselves sufficiently to the US Culture. They need to be enthusiastic, offer new ideas and most importantly respond in 48 hours.” 

At the Cambridge Enterprise Conference founders of successful technology companies discuss their strategies for penetrating international markets. As Gill points out, unless your backyard is California, most technology companies need to build international aspirations into their business plans from the outset. 

The CBI is a strong advocate for R&D tax credits, which rewards those that have already invested in innovation and are therefore making a valuable contribution to the economy. The R&D tax credit in the UK acts as an incentive in both retaining R&D spend in the UK but also in attracting R&D spend from abroad – against fierce competition from countries such as France which claims to be ‘the best place in Europe to conduct R&D’.

Gill comments, “As the economy rebalances and we emerge from the recession, new markets and opportunities for growth are opening up for British companies. The R&D tax credit will help support this and provide an endorsement for the technologist that the work is innovative.” 

One Cambridge company that has recently won praise from Lord Mandelson for its export achievement is Visual Planet, which has sustained organic growth despite the recent downturn. The company brought Internet technology to the high street by developing touch-screen films that can be integrated into display screens and shop windows and it now has an international presence.  

However, part-time Finance Director Richard Heyes admits that the complexity of applying for tax credits has delayed the company from reclaiming its investment in R&D. 

“I did claim for one of my other charges, Dataracks, a few years ago, for the development costs of the Elite range of cabinets, and got a refund – which was much needed at the time. I have a claim to do for Visual Planet which to be honest has slipped down my priorities as the process seems pretty torturous – anything that clarifies what is eligible is useful.” 

SJIC has worked with R&D tax experts Peters Elworthy and Moore (PEM) to develop a simple checklist that will enable technologists to see if their work is eligible.  

The ‘R&D TaxEway’ is a questionnaire in plain English that guides technologists through a series of questions to quickly determine eligibility. SJIC plans to develop this into an online tool that will capture their answers in a form that can be presented to an accountant or professional adviser to facilitate easier completion of the necessary paperwork. 

Research published by the CBI in February 2009 * showed that while the majority of companies had their claims paid in full, and SMEs made the highest cost savings (of 10.5% on average), seventy percent of companies that had claimed had used the large company scheme.  

Stephen Bunting, Business Tax Director at PEM, has specialised in this area since it first emerged in 2000. One of the accountancy company’s clients, Axon Automotive, looks set to recover tens of thousands of pounds from the Chancellor. 

“The most important thing is to emphasise is that you don't have to be discovering DNA to qualify! I have helped companies claim R&D on items as mundane as goldfish bowls, oil pumps and even a cheese slicer,” comments Bunting. 

“When the revenue guidelines first came out they were very difficult to follow but the rules have been substantially rewritten and the majority of the claims that we have submitted have been accepted.” 

Bunting explains that to qualify a company needs to have spent over £10,000 on R&D that they can justify as overcoming a technical or scientific uncertainty, and to have an interest in the Intellectual Property. They don’t need to have paid tax and can even claim for contract work that they have done for someone else. 

“You don’t need a eureka experience for it to count as R&D and the good news for software companies is that you don’t need to own a patent.” 

Software companies are often unable to protect their work with patents, which disqualifies them from government grants and is off-putting to investors. R&D tax credits provide a means of reclaiming the entrepreneur’s investment, supporting the organic growth of these companies and reducing the barriers for entry. 

Gill hopes that with the new tool smaller companies will benefit.  

“With bank and VC finance hard to come by at present, taking advantage of the government’s generosity makes a lot of sense!”

R&D TaxEWay questionnaire is available for down   http://www.stjohns.co.uk/news/2009/9/doing-rd/ 

The 10th Cambridge Enterprise Conference, Diving with Dolphins: Navigating International Waters is a joint initiative between St John’s Innovation Centre, The Greater Cambridge Partnership and NW Brown Group. It is sponsored by Peters Elworthy and Moore (PEM) and St John’s Innovation Centre and supported by Business Link East. Further information is available at www.cambridgeenterpriseconference.co.uk

- ENDS -

For media information please contact: Helen Goldrein/Claire Lynn, Holdsworth Associates. Tel: 01954 202789, email: [email protected] 

www.holdsworth-associates.co.uk 

For information about the conference: Peter Hornby, Cambridge Enterprise Conference. Tel: 01223 421081, email: [email protected]

www.cambridgeenterpriseconference.co.uk 

Notes for editors 

About the Cambridge Enterprise Conference 

The Cambridge Enterprise Conference is aimed at encouraging enterprise and improving the performance of new and innovative businesses. It has been the springboard for numerous enterprise-oriented events around the UK.  

The nine conferences to date have been attended by over 2,000 delegates representing 22 countries, and have featured highly respected entrepreneurs, investors and professional experts from around the world. 

It is hosted by the St John’s Innovation Centre the world’s first incubation centre for high technology businesses.  

www.cambridgeenterpriseconference.co.uk