UK Innovation Forum - Thoughts From the UKIF Membership ...

Thoughts From the UKIF Membership

By: Christopher Orphanides September 13, 2012 10:07 PM

John Moore ? Making the most of tax reliefs for technology companies

John is a chartered accountant with Kingly Brookes LLP. He specialises in assisting scientific and technology companies to gain additional funding by either reducing their tax bills or obtaining cash repayments using the R&D tax relief and, in the near future, the Patent Box tax relief.? This week John observes:

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I read some encouraging news this morning.? According to figures released by Ascendant, the corporate finance advisory company, and as reported in the Financial Times, investment into UK technology start-ups reached a 10 year high in the first half of 2012, with nearly ?600m put into early stage businesses.? They expect the full year figures to be between ?900m and ?1bn. Apparently much of the money is going into internet, mobile digital media and cleantech businesses, whereas sectors such as semiconductors and software have seen a down turn.

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However, whist overall this makes encouraging reading, my experience is that many companies are having as much trouble as ever sourcing the required third party investment to fund their R&D efforts. What is sometimes overlooked is that since 2000 the Government has been giving increasingly generous tax reliefs (and for many non-tax paying SMEs, cash funding) to companies carrying out activities that qualify for the R&D tax relief.

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What has become clear to me, working with companies to optimise their claims, is the amount of misunderstanding and misinformation that exists in the population of eligible companies. In my experience this very often leads to companies not claiming as much R&D tax relief as they could do and, for many companies, not claiming at all when they should be. Whilst the news referred to above appears to indicate an abundance of cash for technology companies I still feel that many are missing out on what could be sizable amounts of additional funding courtesy of HMRC!

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Since 2000 the legislation and practice around the claiming of R&D tax relief has constantly changed to make it ever more generous. Perversely this may have added to some of the confusion, and apparently patchy take up.

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The Patent Box tax relief regime, which applies from 1 April 2013, in essence allows companies with? qualifying patents to have the profits generated by those patents taxed at only 10% compared to anywhere between 20% and 25% at present. Companies are going to have to get themselves ?regime ready? before the start date if they want to be able to take full advantage.

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This is planned to be the first in a series of articles highlighting some of the opportunities and pitfalls in taking advantage of these reliefs for innovative technology companies.

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Please feel free to contact me via the expert members section of the website if you have any specific questions in the meantime.

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Richard Atkinson - Sometimes? it?s Go High or Go Home.

Richard is Chief Executive of Second Mile Ltd and is an experienced technology entrepreneur who has led start-ups in the cleantech, automotive, communications, defence and software sectors. This week he writes:

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We?re working just now with a retired accountant who lives in a tiny village in the Cotswolds.? As such people are wont to do, he?s invented a completely new gearbox architecture.? Interesting.

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Really interesting in fact.? It has that kick-yourself-it?s-so-obvious quality to it.?? Good work is often devilishly simple.? The question is, what does he do now?? Gearboxes are big beasts, costing lottery-win sums to develop, tool and produce.

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It?s kind of hard to feel that?s possible from this sort of starting point.? But in this case it?s necessary.? We?re making some bold claims on this one ? the analysis suggests they?re correct ? because for any lesser result it just isn?t going to get a hearing.? It?s go high or go home.

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And sometimes that?s how it is.? The context sets your strategy, and there?s very little you can do about it.?? Entrepreneurship is, as one of the best definitions I know has it, ?The pursuit of opportunity without regard to resources currently controlled?.? Rarely more so than in this case.? We just might pull it off, you know.

Source: https://connect.innovateuk.org/web/uk-if/articles/-/blogs/thoughts-from-the-ukif-membership-28

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