APPLICANT GUIDANCE Your Project Costs

APPLICANT GUIDANCE Your Project Costs Applicant Guidance Your Project Costs July 2015 Page 1

Introduction This document is intended for use with your Innovate UK Competition Guidance. It covers the following: 1. Eligible project costs: What eligible costs can you claim for your project? o This section now includes additional guidance for Start- up Companies and Sole Traders 2. Costs which are not eligible for funding 3. Project finance forms for businesses and non- academic partners 4. Research Organisation partners 1. Eligible project costs: What can you claim as eligible costs for the project? There are a range of costs that Innovate UK is prepared to support as your eligible project costs. These are described in the table below. The estimates of the costs that you use to complete your finance forms must be the total costs for your project and will include costs for all activities and all participants that are involved in your (section) of your project. Please Note: If you wish to include revenue generation activities as part of your development cycle, then to comply with the EU state aid requirements, any revenue that is generated by your project must be used to offset your project costs against which grant can be claimed. Eligible Costs For a cost within your project to be eligible for funding it must: be incurred and paid between your project start and end dates. meet the eligibility criteria in the categories listed below. Innovate UK pays your grant on the basis of audited actual eligible costs. These costs must be incurred and paid between your project start and end dates. Labour Costs You may claim the labour costs of all individuals working directly on your project. Please note: If your application is successful and is awarded grant funding, all labour cost claims must be supported by accounting records (including timesheets and payroll records for example) that show the actual hours worked by individuals and paid by the organisation. The costs that you can include in your labour costs (based upon your PAYE records) are; gross salary, NI, company pension contribution, life insurance or other non- discretionary package costs. Please note that discretionary bonuses or performance related payments of any kind are not eligible. Applicant Guidance Your Project Costs July 2015 Page 2

Where an employee is part time, their costs should be entered as full time equivalent. Your eligible labour costs will be on the basis of salary amounts actually incurred and paid. You therefore cannot include any form of in- kind/goodwill contribution by staff members or costs relating to profit related pay, dividends, shares, share options, royalties or similar remuneration methods. For example, companies that pay Directors a salary of 7k and use dividend payments for the remainder of the remuneration package (for personal tax liability reasons) can only include a daily labour rate based on the 7k salary. The total number of working days per year for the organisation is based on full time working days per year less standard holiday allowance. Sick days, waiting time, training days and non- productive time are not eligible as part of the calculation. On your finance form, list the total man- days worked by all personnel working directly on your project and briefly describe their role. Project Management The costs of project management by a lead organisation on behalf of your consortium are eligible and should be included within your Labour calculation. In cases where your project management is sub- contracted, a strong case should be made for the necessity and benefits of this approach. Micro companies only In some micro companies a Director may be running the business in addition to working on a project, receiving income only in the form of dividends. However, dividends are not eligible costs or an accepted form of remuneration for State aid purposes. If you are a Director of a micro company, not currently on the company payroll and working directly on the project, you have not previously been able to claim for your labour. Innovate UK has aligned its policy with that of the European Commission which allows your labour to be included as eligible costs subject to the following conditions: 1. Labour costs must be calculated using a maximum of: 8 hours per day 5 days and up to 40 hours per week 22 per hour. 2. All costs arising as a result of using the above calculation must be paid to the Director through the business payroll and subject to Income Tax and National Insurance at source 3. Time worked on the project must be supported by timesheets, payroll and project records giving a good audit trail If your application is successful: the total amount of time and cost will be reviewed before approval Applicant Guidance Your Project Costs July 2015 Page 3

and the terms and conditions of the grant will include compliance with the above provisions Sole Traders & members of Unlimited Partnerships not operating a payroll If you are a sole trader or a member of an unlimited partnership with no employees and so not operating a payroll scheme, you will be paying income tax and national insurance on business income. If this is the case, you can claim for your time spent working on the project using the method detailed above for Directors of micro companies. The same rules apply for the rate, hours and accounting records, and the terms and conditions will be included in your offer letter should you be successful. Overheads Incremental overheads incurred directly as a result of doing the project are eligible. You need, therefore, to be able to estimate what reasonable overhead costs you will incur and pay during the project that can be attributed to the extra work you are doing. Three methods of declaring overheads are available. You can select one option: 1. select a flat rate of 20% of labour costs with no further calculation needed 2. complete the Overhead Rate worksheet or 3. provide your own detailed explanation on this worksheet. If you choose: option 2: the Overhead Rate worksheet, you must complete the table to calculate the number of working days in each year. This is used to automatically calculate the day rate for each given salary. For each individual within the project provide their labour cost and the total number of days they will work on the project. The cost is automatically calculated. If there is more than one individual on the same pay grade, indicate the number of staff and sum the total days worked by all staff on that rate. option 3: to use your own calculation, you must provide sufficient detail to enable Innovate UK to check the eligibility and appropriateness of all costs included in the calculation. Note that if previously agreed overheads rates are quoted (from previous Innovate UK projects), you must still describe the methodology and include references to the previous project(s). Please note: 1. The Overhead Rate worksheet does not fit all business models, and the resulting rate is affected by the eligibility of the amounts included in it. 2. The rate calculated by using the worksheet is indicative only and is not final until reviewed and approved by Innovate UK 3. Innovate UK will review and test the outcome of using either your own calculation or the Overhead Rate worksheet in the context of your business and the project to ensure that the items included are eligible and reasonable. 4. If you have been in receipt of an Innovate UK grant for a previous Applicant Guidance Your Project Costs July 2015 Page 4

project, there is no guarantee that historic rates will be acceptable as business structures and costs change, therefore all rates are subject to review. The bullet points below list the main items that you should note when calculating your overhead percentage. Board and Senior Management Salaries and Fees (based upon PAYE costs rather than package costs) should relate to the executive function of the organisation (e.g. Board of Directors). You should only include senior staff members that are purely strategic or administrative in function NOT income generating, productive or customer facing/selling. You should NOT include production, R&D, distribution/supply chain, selling or marketing senior staff. Administrative support functions include HR, finance, IT, site services and any other administrative support activities. You should NOT include income generating functions or related functions such as production departments, R&D, quality control/assurance, engineering, distribution/supply chain, selling or marketing. Other Support Staff costs should only relate to staff included in overhead. Bonuses, awards, profit related pay, company car expenses and any discretionary benefits to staff are ineligible. General travel and subsistence should only relate to staff included in overhead. Sales, Marketing and Account Management costs are ineligible. Entertainment and hospitality costs are ineligible. Patent maintenance costs are eligible but should NOT include new filings and search fees in new territories or costs relating to Trademarks. General, site and utility costs should be relevant to administrative facilities NOT operational/production facilities. Non- productive time or waiting time between projects is ineligible. Materials Consumed There is an overhead calculator for sole traders that is based on the Self assessment income tax return for self employed. Overhead rules are slightly different for sole traders or partnerships as most costs should be specific to your project. The costs of materials to be consumed directly on your project are eligible costs, providing that they are not already included in the overheads and purchased from third parties. If material has a residual/resale value at the end of your project, costs should be reduced accordingly. If you are using materials supplied by associated companies or sub contracted from other consortium members then you are required to exclude the profit element of the value placed on that material - the materials should be charged at cost. Software that you have purchased specifically for use during your project should be included in materials. However if you already own software which will be used in the project, or it is provided for usage within your consortium by a consortium member, Applicant Guidance Your Project Costs July 2015 Page 5

only additional costs incurred & paid between the start and end of your project will be eligible. Examples of costs that may be eligible are those related to the preparation of disks, manuals, installation, training or customisation. Costs should be split between their component parts and allocated to the appropriate cost category. Capital usage Sub- contracts, Consultancy Fees (including Fees for Trial and Testing) Travel and Subsistence Other Costs Capital usage refers to an asset utilised by your planned project, which has a useful life of more than one year, is stand- alone, distinct and moveable. You should provide details of capital equipment and tools to be bought or consumed on your project. You should calculate a usage value by taking the purchase cost (or net present value at the start of your project, if the equipment is already owned) less its expected residual value at the end of your project. This value is then multiplied by the percentage that your project will be utilising the equipment. This final value represents the eligible cost to your project. Sub contract costs relate to work carried out by third party organisations that are not part of your project or your collaborative group. You may sub contract work that is essential to the success of your project where the expertise does not exist in the collaborative group or where it would not be cost- effective to develop in- house skills for your project. Sub contract services supplied by associated companies should exclude any profit element and be charged at cost. You should name the subcontractor (where known) and describe what the subcontractor will be doing and where the work will be undertaken. We will look at the size of this contribution when assessing eligibility and level of support. You should only include reasonable costs that are justified and will be incurred exclusively for the progression of your research project. Details and purpose for the expenditure, including number of staff attending, must be given. Other Costs can be used for eligible costs which are not included in the above sections. Each type of cost that you include in this section should be described in the application form as to what it is, why it is eligible and so included in the costs of the project. Examples may include: Training Costs These costs are eligible for support where they are specific to and necessary for your project. Innovate UK may consider support for management training specific to your project but will not support ongoing training. Preparation of Technical Report(s) For example, where the main objective of your project is the support of standards or technology transfer. You should demonstrate how this report is above and beyond what would normally be produced through good project management. Market Assessment There is some scope for support of market assessments studies in order to more fully understand the applicability of your projects results to the intended market and to help steer your Applicant Guidance Your Project Costs July 2015 Page 6

project towards exploitable ends. Market research as a promotional tool is ineligible. Other Costs (cont.) Licensing in New Technologies Exceptionally, Innovate UK may consider support where it makes sense to do so, for example, to avoid reinventing the wheel. Where imported technology makes up a large part of your project (where technology is valued at more than 100,000) then it will be expected that there is development of that technology as part of your project. Patent filing costs for NEW IP generated by your project are eligible for SMEs up to a limit of 7,500 per partner. These should not include legal costs relating to the filing or trademark related expenditure as these are deemed to be marketing/exploitation costs. Regulatory compliance costs are eligible if necessary to carry out your project. Project Audit, Legal and accounting costs Cash Transfers Cash Contributions Receipts and Residual Values for Energy Projects The legal costs of setting up your project or the collaboration and costs associated in conducting audits, accountant s reports or making grant claims are ineligible. Cash transfers are not allowable except under exceptional circumstances with prior agreement. Where these are allowed, the transfers are cash neutral to the total eligible costs of your project. The donating partner should show the cash value in their other costs as a positive value. The receiving partner should show an equal negative value in the Other Costs worksheet. Once your project commences, it will be necessary for the partners to invoice and transfer cash between them in order for this to be eligible. If a cash contribution is being made to your project from outside of your consortium, this should be shown as a negative value in the Other Costs worksheet of the form, thus reducing the eligible costs for the receiving partner and reducing their grant application. Receipts from electricity generation and residual values of prototype plant will be addressed by Innovate UK under standard Treasury rules whereby a proportion of the revenue or displaced electricity costs will be recovered and a discounted residual value of a generating plant will be calculated similarly. Applicant Guidance Your Project Costs July 2015 Page 7

3. Additional Guidance for Start- up companies and Sole Traders Eligible costs for start- up companies and new sole traders are based on the standard cost headings with the same rules of eligible and ineligible costs that are set out for all other business participants in the sections above. The following guidance is intended to assist you if you do not have a trading history on which to base your calculations. 3.1 Labour rate calculation Sole Traders and members of Unlimited Partnerships Labour costs are normally calculated on the basis of salary paid through a business payroll scheme. For sole traders and members of unlimited partnerships not operating a payroll, and where you do not have sufficient trading history to state your actual direct labour rate (excluding overhead and profit), the maximum labour rate you can claim is set out above. You will need to keep project records to show the hours worked directly on the project and how your labour claimed has been taxed as business income. 3.2 Overhead rate calculation Overheads can be applied as a percentage to the direct labour costs calculated for your project. The overhead percentage is calculated by using one of the three methods detailed above, using your previous year s profit and loss account. If you do not have previous year s figures, and have not selected the 20% overhead rate option, you should show how you have estimated the overhead costs you will incur and how you have calculated the overhead rate that you have used for this project. 4. Costs which are not eligible for funding The following costs are ineligible and should be excluded from any part of your project costs and any overhead calculations: Recoverable input VAT; Interest charges, bad debts, profits, advertising, entertaining; Hire purchase interest and any associated service charges; Production, R&D, quality control/assurance, engineering, distribution, supply chain or selling costs or activities; Advertising and marketing costs or activities; Entertainment and hospitality costs; Profit earned by a subsidiary or by an associate undertaking work sub- contracted out under your project; Inflation and contingency allowances; The value of existing assets such as IPR (not developed as part of this project), data, software programmes and other exploitable assets that any of the collaborators contribute towards your project; Applicant Guidance Your Project Costs July 2015 Page 8

Project audit or legal costs. The legal costs of setting up your project or the collaboration and costs associated in conducting audits, accountant s reports or making grant claims; Any of the remaining 20% of FEC costs from academic collaborators; Sick days, waiting time and non- productive time; Bonuses, awards, profit related pay, company car expenses and any discretionary benefits to staff. Project audit fees 5. Project finance forms Project Finance Forms should be completed by each business partner with either a single stage or a full stage application into a competition. In collaborative competitions, each business partner (or non- academic partner) in a consortium must complete a project finance form to show the details of their eligible project costs. The paragraphs above describe which of your project costs are eligible for funding, and these should be entered into the relevant sections on your finance form. If your project involves a collaboration, finance forms can be obtained from the lead partner of your consortium who will download them from the competition website. Once you have completed the forms they will need to be returned to the lead partner of your consortium who will upload them to the secure competition website along with the application form and any appendices. Every member of the consortium who is seeking grant must submit a finance form regardless of the size of the grant that is being requested. There are separate finance forms for industry and research organisation partners. Please note: A Research Organisation or a Catapult that is unable to submit their costs through Je- s must complete an industry partner finance form. For further information please see the separate guidance on Funding on our website by clicking here: https://interact.innovateuk.org/- /funding- rules How to complete your project finance forms The finance forms are Excel spreadsheets and must not be altered in any way in order that we can process them within our systems to calculate your grant. The spreadsheets contain formulae that will assist you with your own calculations and which also check and confirm when you have completed each individual section. Excel Worksheet Tab Guidance Form status Description and Guidance This worksheet provides hints and tips on how to complete each tab of the Industry Finance Form. Please read this sheet before completing the form. This worksheet is designed to assist you in showing the status of the completion of the form. As you complete each form, it will calculate the status. When all sub headings are showing as Complete, the Major Heading will also show as Complete and you are ready to submit your form. Applicant Guidance Your Project Costs July 2015 Page 9

Applicant details Other public funding This sheet is where you enter your company and project information. It is very important that you use the full legal name of your organisation as this is the name that will appear on the Grant Offer Letter if you are successful. If your organisation is part of another organisation it is important that the Ultimate holding organisation details section is completed fully and correctly in order to establish your organisation s funding size. Complete the SIC code appropriate to your organisation: a full list of SIC codes is provided on the final tab of the Excel file. You must provide details of other public funding that you are currently applying for (or have already applied for) in relation to this particular project. You do not need to include grants that have been used to reach this point in the development process and are now completed. This information is important as other public sector support is counted as part of the grant you can receive for your project. Other projects Labour costs Overhead rate Material costs Capital usage Sub contract costs Travel & subsistence costs Other costs Project costs summary If you have previously or are currently involved in other projects funded by Innovate UK, please provide the Competition Name and Applicant Numbers of all the Competitions. This includes competitions where you have received a grant offer but your project has not yet started. Also list in this worksheet any other applications you are making to this particular competition. The costs entered throughout your spreadsheet are automatically picked up in this worksheet. Using these costs you should estimate how your costs will be spent across the financial year(s) of your project. Provide the amount of grant assistance sought from the Innovate UK. This figure should not include any amounts sought from other sources as detailed on the Other Public Funding worksheet. Applicant Guidance Your Project Costs July 2015 Page 10

6. Research Organisation partners If you have partners that are Universities or other Research Organisations that are applying through the JeS system, they will need to complete an Academic Partner Finance Form. To do this they will need information from the JeS submission detailed below. Innovate UK supports the principle of Open Access where project partners have agreed to publish outcomes as a route to dissemination. This should be included within a project s Collaboration Agreement and should follow the guidelines contained in the RCUK policy on Open Access. The policy is available here: http://www.rcuk.ac.uk/research/outputs Additional costs for publication charges will not be considered. Special note: PhD student project costs Please note that the costs of PhD project students will not be eligible for inclusion in research organisation project costs. This is in line with current Research Council guidelines. Je- S submission Each academic partner in your project needs to complete and submit an on- line standard proposal via the Research Councils Je- S website by the noon deadline given in your Competition Brief or Competition Guidance (which you can find by searching the competitions website using the link https://interact.innovateuk.org/funding- competitions ). If any of your academic partners fail to submit this form, it could result in your whole application becoming ineligible for this competition. Further guidance on how to submit the Je- S form can be found below. To gain a better understanding of the Je- S requirements and process please go to the Je- S website at https://je- s.rcuk.ac.uk. Please note that once your academic partner has submitted their form via Je- S it is not possible to resubmit them. Your academic collaborators must use the Je- S system to calculate and submit their financial information. Academic partner project costs are calculated on the basis of Full Economic Costs (FEC) as defined by the Research Councils. Should your project be successful, Innovate UK will fund your academic partners at 80% of FEC in line with Research Council Funding. The remaining 20% of FEC is not counted as part of the academic partner s contribution to your project and must not be included in any total project costs provided by your academic partner(s). A pdf copy of the Je- S output document confirming a status of With Council must be given by each academic partner to the lead partner of the consortium so that they can complete the finance table contained within the application form. Academic partner finance form The data contained within the Je- S needs to be transferred to the academic partner finance form and a copy of each Je- S pdf must be uploaded with your application form. Organisations that are eligible to be considered as academic collaborators are registered on JeS and may include: Universities and similar HEI (Higher Education Institution) organisations; Government Research Establishments; Not- for- Profit Research and Technology Organisations (RTOs). Applicant Guidance Your Project Costs July 2015 Page 11

Please Note: other Research Organisations not registered on JeS, will need to complete an Industry Partner Finance. Please see the Guidance on Funding for further details by clicking here: https://interact.innovateuk.org/guidance- for- applicants Submitting research partner information through Je- S To submit an on- line Standard Proposal your academic partner will need to be registered with Je- S. If they are not registered with Je- S, they should make arrangements for registration as soon as possible to ensure that they are able to meet the deadline, as registration may take some time. They must obtain the unique Innovate UK application number for the application from the lead partner of the project. This unique reference number links together all the Application and Finance Forms for the project. To access the on- line Form, you should log onto Je- S, then: Select Add New Document Under the option for Council select Technology Strategy Board Under the option for Document Type select Standard Proposal Under the option for Scheme select Technology Strategy Board CR&D A one- page Justification of Resources, which describes the need for the resources, should be submitted as an attachment to the Je- S application. A two- page Pathways to Impact appendix is also required. This appendix must be submitted with both the Je- S submission and the Innovate UK submission and will be considered as part of the assessment of the proposal. Guidance on the content of the Justification of Resources and Pathways to Impact appendices are available on the Je- S website: https://je- s.rcuk.ac.uk. The on- line forms are completed and submitted in the same way as all other Research Council funding applications. Academic and research staff should therefore be familiar with the system. All academic participants will need to provide a pdf copy of the Je- S submission output document, showing a status of With Council, to the lead partner so that they can complete the finance table in the Application Form and upload the pdf document with the application. Please ensure that you allow sufficient time for Je- S approval before the Competition submission deadline. Important Note: Academic collaborators should note that Research Council standard procedures apply to Innovate UK in the same manner as for all Research Council proposals. Principal Investigators, submissions are held in a Submitter Pool in the Je- S system until Head of Department and University Research Office approval have both been received. It is the Research Office approval that has to meet the deadline and the onus is on the Principal Investigators to notify their Heads of Department and Research Office that a proposal has been submitted and that a deadline is imminent. If you have any queries with regard to registering or using Je- S, please contact the Je- S Helpdesk by e- mail to JeSHelp@rcuk.ac.uk or by phone on 01793 444164. Applicant Guidance Your Project Costs July 2015 Page 12