NOVEMBER 2019 - NEWS RELEASE
Bournemouth-based innovation tax incentives consultancy Business Cash Enabler has launched a new service aimed at helping business derive value from their Intellectual Property (IP). This service can bring considerable commercial benefit to qualifying businesses, as consultant Rob Sowden explains:
“I am delighted to be able to offer this service to businesses in Dorset and beyond, it is a natural fit with the research and development (R&D) tax credits claims management service I have been helping companies with for several years. Claiming R&D tax credits is only part of the financial reward for innovative businesses. Many companies have not realised the commercial potential of their intellectual property (IP), often seeing IP as merely something to protect; however there are considerable financial gains to be derived from IP.
“With a simple patent, found in the R&D that a business performs, there could be big savings on corporation tax, under the government’s Patent Box relief scheme, which reduces corporation tax to just 10% on profits arising from global revenues from patented products or processes. In addition, an IP audit can identify and value IP as intangible assets which can represent around 80% of corporate value.
A few key considerations for any business to which this may apply are:
“Businesses shouldn’t be intimidated by the legal and academic jargon surrounding IP. Business Cash Enabler works with experts that combine scientiﬁc and technical knowledge with particular expertise in IP strategy, whilst ensuring that a business is fully using the tax saving incentives that are available to innovative UK businesses. This service ensures monitoring of the legal, technical and ﬁnancial developments of tax relief schemes relating to IP so that a company will always have advice that is up-to-date and reﬂects the best of current practice.”
Rob Sowden of Bournemouth-based consultancy Business Cash Enabler reports an increase in Dorset companies benefiting under the government’s Research & Development (R&D) Tax Credits scheme:
Many more Dorset-based businesses are now receiving an improved benefit under this generous scheme, designed to reward unique innovation activities in business. For many years the scheme has seemed too good to be true to many companies who have not applied for the credit or cashback, due to many myths and misinformation around the scheme. Many businesses have tried to self-assess whether they qualify and have assumed they don’t, many have even been notified by their professional advisors that they aren't eligible, when in reality they are. One myth is that a business has to be profitable or has to be paying corporation tax to be eligible. Some find it hard to believe that they can receive an annual cash payment when they are loss-making and not tax-paying. Reality is, they may receive a higher cashback payment than profitable companies because the scheme is based on costs incurred, not revenue or profit.
This increase in government funding in the region fits well with Inform Direct’s recent report ‘Review of UK Company Formations’, that was referenced in the Bournemouth Echo earlier this year, stating that Dorset “continues to provide a supportive environment, both for new business ventures and existing enterprises”. This matches my experience over the past 5 years, that Dorset is a burgeoning environment for innovation, notably in the engineering, manufacturing and digital sectors. Interestingly though, many businesses that are not in these classic innovation sectors are also benefiting from the government’s R&D cashback.
The government paid out £3.7bn in the last reported year, with an average SME claimant receiving £53k annual benefit across the UK. Many companies that have previously claimed have received really small amounts, £5k, £10k, £15k, when they may have been entitled to 2, 3 or 4 times that amount, often a healthy six-figure cashback. Under-claiming happens when the process is mistaken for an accountancy workstream, but it really requires a technical appraisal, combined with specialist knowledge of the legislation. Maximised claims are based on a technologist-led approach to ensure all eligible innovation activities are included in a claim and, importantly, that projects that aren't eligible haven't been included, resulting in potential HMRC clawback later on. It is possible to claim back any shortfall for the prior two accounting periods, which can bring in an unexpected cash injection to a business.
Since moving to Bournemouth from London, I have continued in my role of advising companies if they qualify for government funding under the R&D tax credit scheme, as part of my tax consultancy.
In the first two years I enabled local businesses to obtain £10 million of expenditure qualifying for tax relief or cash credits. That is £10m that slipped the net! That represents circa £2m in bottom line cash benefit to businesses - funding they didn’t know was there and don’t have to pay back.
And that is just the tip of the iceberg. Much of the benefit came from companies that thought they had ‘already done it’, but they had seriously under-claimed.