The Knowledge: R&D credits give spin-outs a boost

CHANCELLOR George Osborne’s changes to the research and development (R&D) tax credit system should benefit a small UMIST spin-out that is targeting global markets.

Ken Primrose, managing director of Manchester-based Industrial Tomography Systems (ITS), said the measures will have a direct impact on the firm and help it employ more people.

In last month’s Budget Mr Osborne said the R&D tax credit will rise from 175% to 200% this year and by a further 25% next year. This means that for every £100 a company spends on R&D it will be able to set £225 against its tax bill.

“This was one of the things I was looking out for in the Budget because it ticks all the right boxes in terms of what the Government is trying to do to improve the situation for small and medium-sized enterprises and address the knowledge-based economy,” says Mr Primrose.

The company already pays a low amount of tax thanks to the existing R&D regime because research accounts for around 20% of costs.

“This will encourage us to continue to invest in that area,” says Mr Primrose. “It was an obvious thing to do but you never know what scope they have to implement things like this. It was a good move by the Government and we’ll be responding in the way they want us to by taking on more staff. We’re in the process of recruiting two people at the moment.”

ITS specialises in supplying industry with equipment that creates images of processes in hard-to-reach locations. Mr Primrose compares its work to the images CAT scans build of the human body by using x-rays.

Instead of x-rays ITS’ equipment uses electrical resistance to generate images which are processed with the same software used by CAT scanners. Its clients include Dupont, Pfizer and Statoil. “If you’ve got something mixing or flowing we can show pictures of how it is happening,” says Mr Primrose. “It might be in a pipeline or toxic or radioactive.”

The company emerged from UMIST in 2002 and is now based in Manchester where a team of 15 staff make the instruments and support customers. It had sales of around £1m last year.

“We’re pretty much the world leader in what we do. There’s virtually no competition which makes selling it easier,” says Mr Primrose. “The issue is one of meeting the right people and convincing them that we really do what we say we can.”