Knowledge Transfer Partnerships or R&D?
Two of the main routes for businesses looking to innovate through product development are knowledge transfer partnerships and R&D tax relief, but if you want to innovate and develop, which will work best for you?
Effectively, the end result should be the same: product innovation for market differentiation. What these two routes offer are different means, and financial support, to achieve success through innovation.
Knowledge Transfer Partnerships (KTPs) give businesses the opportunity to ally themselves with academic or research bodies. R&D provides various forms of claimable tax relief to support research and development.
As specialist manufacturers for thermal management solutions, Elmelin supports product and process innovation across many industries, and works with companies looking to develop in this way.
How Knowledge Transfer Partnerships Work
To innovate, companies must first ensure they have the right skills at their disposal. According to Innovate UK, 69% of UK companies find accessing these skills to be a major issue.
KTPs help address this issue, by giving companies the opportunity to access skilled researchers. At the same time, academic institutions can benefit because this arrangement gives their students real world work experience, and often helps ensure their future employment.
This potential for career acceleration can mean graduates who have taken part in a KTP earning on average £50,000 more over a 10 year period.
Over 80% of businesses involved in KTPs have reported that they have then recruited their placements after the scheme has ended.
In this context, Knowledge Transfer Partnerships are extremely effective for recruiting the essential talent companies need to invest in innovation and improve their profitability.
While big names in business have been involved in KTPs, the majority of companies involved are SMEs, across the UK. Knowledge Transfer Partnerships, therefore, have the potential to support a countrywide industrial revival.
Who Can Participate in a Knowledge Transfer Partnership?
Each Knowledge Transfer Partnership will involve a UK-based business, an academic or research organisation and a graduate with the suitable qualifications, known as an associate.
The individual graduate must be capable of leading a business project strategically.
The business will receive a grant that part-funds the scheme, but will also need to contribute to the salary of the associate and the cost of someone to supervise the scheme.
Most academic and research organisations will have a dedicated KTP office, who can help businesses and their academic partners work closely together as part of the scheme.
Businesses of any size can apply for a Knowledge Transfer Partnership. The amount you must contribute will depend on the size of your business.
According to the Government website, SMEs contribute around £35,000 a year, or a third of project costs; while larger businesses are expected to contribute approximately £55,000 annually, or a half of the cost of the KTP.
Seeking Tax Relief for R&D
An alternative to participating in a Knowledge Transfer Partnership is to seek support for R&D through Government tax breaks. This means ensuring you have an eligible project before applying.
The Government’s own definition of R&D is that it must be a project that is seeking to advance overall knowledge or capability in the field of science or technology.
There are two R&D tax relief schemes for this. There is an SME scheme, allowing companies to claim up to 230% relief; and the RDEC (Research and Development Expenditure Credit) scheme, for larger companies, offering tax credits at 11% of R&D expenditure.
Depending on the size of your business, one or other may be suitable for you. HMRC goes on staff headcount (less than 500 for SMEs) and turnover (under €100m) or a balance sheet total (below €86m).
How Does Your Project Qualify for R&D Tax Relief?
It is vital to identify the types of project that will qualify. Manufacturing, software and engineering companies are often those involved in this kind of work.
This could be product or process innovation, product development, prototyping or using new material to help improve products, manufacturing processes or the performance of manufactured products.
R&D tax credits can cover certain project-related activities, including feasibility studies, reviewing technologies, analysis, development, finance and personnel and training. So long as these things are supporting the R&D project.
Choosing an R&D Partner
While a Knowledge Transfer Partnership offers collaboration with an academic or research organisation, and the close support of an associate, taking the R&D route will, for many businesses, involve choosing an R&R partner.
This partner should be able to provide you with a high level of specialist technical support, aligned to your objectives.
While it might be tempting to keep R&D in house, the reality is often that this might not be the most cost effective solution.
It comes down to resources, and whether your in-house expertise can drive your innovation at the pace you need to be market-ready.
Outsourcing R&D allows companies to tap into areas of focused expertise they would otherwise not have access to, and to then support their own in-house teams with this expertise and depth of knowledge.
Knowledge Transfer Partnership or R&D?
Both these routes offer practical solutions for businesses looking to innovate, and both provide a degree of financial help.
It comes down to your individual company and what will work the best in meeting your business objectives. Talk to us about innovation, and how our capabilities can work with your plans.