A KTP is a three-way collaboration between a business, a university or academic institution, and a graduate – the KTP ‘associate’. The university employs the associate, who works at the company, bringing their expertise and knowledge to the task of finding a specific, strategic solution that will help the business grow.

Most KTPs run from one to three years, and SMEs account for around 80% of the partnerships. They’re part-funded by public body Innovate UK, with businesses contributing to the associate’s salary and the cost of a supervisor to oversee the scheme. The amount a business is expected to contribute varies, but the average annual contribution of an SME is around £30,000. For larger companies, contributions average at around £45,000. Although the manufacturing sector in particular has made some exciting advances thanks to KTPs, they are open to all sectors, and last November Innovate UK pledged an extra £30m of funding to further develop the programme.

In addition to the business growth you could enjoy as a result of your KTP, there is a further incentive to the scheme. Along with government grant funding of up to 67% of the costs of your partnership project (50% for larger companies), a KTP can qualify you for R&D tax relief.

This generous form of government tax relief is available to all kinds of business. For every £100 of qualifying R&D expenditure, relief is available at £24.70 for profit-making SMEs and £33.35 for those that are making a loss. For larger companies, relief is available at £8.90 for every £100 of qualifying R&D expenditure.

If you are developing a product or service that you can prove is truly innovative or a technical improvement on anything currently available, you could be eligible for tax relief.

As your business is essentially paying the university for the associate’s time and expertise over the course of the project, this cost is treated as payment for an ‘externally provided worker’ from an ‘unconnected staff provider’, with potentially 65% eligible for tax relief.

Fortunately, the KTP is not classified as ‘notified state aid’, which could otherwise disqualify a company from claiming R&D tax relief under the SME scheme. However, some KTPs are associated with grants from Innovate UK, which could move them into the less generous large-company scheme. This depends on the grant and the project in question, so if you are unsure about your eligibility, speak to a tax specialist.

Qualifying R&D expenditure may include:

• salary costs of the KTP associate
• time and input of academic supervisors
• trading and development costs for the associate
• out-of-pocket expenses
• administrative support

Clyde Space is a Glasgow-based firm that makes small satellite systems and CubeSats (miniature satellites for space research). Founded in 2005, the award-winning company’s customers have included NASA, the UK Space Agency, the European Space Agency and the US Air Force.

Clyde Space partnered with the University of Strathclyde in a Knowledge Transfer Partnership to develop an advanced micro-spacecraft. Craig Clark MBE, CEO of the company, says: “We were considered one of the world’s most innovative companies in the field of space subsystems but we wanted to move up the value chain, building our own satellites. KTP allowed us to do that, tapping into knowledge and opening doors to all sorts of other activities.

“Although we were clearly doing R&D, we were being advised by people who didn’t understand the company and didn’t understand the potential. After working with the consultants at [R&D tax specialists] Jumpstart, we recovered more than £60,000 from HMRC.”

The company’s profile in the CubeSat sector went from strength to strength, and in January 2018 Clyde Space was acquired by the Swedish space company ÅAC Microtec for £26m.