Scottish Local Authority Support for Invesment Aid for Research and Development Projects, Research Infrastructures and Innovation Clusters (SC10297)

Legal Context

In terms of Section 20 of the Local Government in Scotland Act 2003, Scottish Local Authorities may provide aid for research and development projects, research infrastructure and innovation clusters.

Objectives of the Scheme

The objectives of the scheme are,

a) to support research and development projects;

b) to support the construction or upgrade of research infrastructures that carry out economic activities and,

c) to support the construction or upgrade of innovation clusters.

Eligible Costs

The aided part of the research and development project shall completely fall within one or more of the following categories:

(a) fundamental research;

(b) industrial research;

(c) experimental development;

(d) feasibility studies

The eligible costs of research and development projects shall be allocated to a specific category of research and development and shall be the following:

(a) personnel costs: researchers, technicians and other supporting staff to the extent employed on the project;

(b) costs of instruments and equipment to the extent and for the period used for the project. Where such instruments and equipment are not used for their full life for the project, only the depreciation costs corresponding to the life of the project, as calculated on the basis of generally accepted accounting principles are considered as eligible

(c) Costs for of buildings and land, to the extent and for the duration period used for the project. With regard to buildings, only the depreciation costs corresponding to the life of the project, as calculated on the basis of generally accepted accounting principles are considered as eligible. For land, costs of commercial transfer or actually incurred capital costs are eligible.

(d) costs of contractual research, knowledge and patents bought or licensed from outside sources at arm's length conditions, as well as costs of consultancy and equivalent services used exclusively for the project;

(e) additional overheads and other operating expenses, including costs of materials, supplies and similar products incurred directly as a result of the project;

The eligible costs for feasibility studies shall be the costs of the study.

In terms of research infrastructures and innovation clusters the eligible costs shall be the investment costs in tangible and intangible assets.

With respect to operating aid for innovation clusters the eligible costs are the personnel and administrative costs (including overhead costs) relating to:

(a) animation of the cluster to facilitate collaboration, information sharing and the provision or channelling of specialised and customised business support services;

(b)  marketing of the cluster to increase participation of new undertakings or organisations and to increase visibility; and

(c) management of the cluster's facilities; organisation of training programmes, workshops and conferences to support knowledge sharing and networking and transnational cooperation.

Support for operating aid for innovation clusters may not exceed a period of 10 years.

Aid Intensity and Thresholds

The aid intensity for aid to research and development projects shall not exceed:

(a) 100 % of the eligible costs for fundamental research;

(b) 50 % of the eligible costs for industrial research;

(c) 25 % of the eligible costs for experimental development;

(d) 50 % of the eligible costs for feasibility studies.

The aid intensities for industrial research and experimental development may be increased up to a maximum aid intensity of 80 % of the eligible costs as follows:

(a) by 10 percentage points for medium-sized enterprises and by 20 percentage points for small enterprises;

(b) by 15 percentage points if the results of the project are widely disseminated through conferences, publication, open access repositories, or free or open source software.

The aid intensities for feasibility studies may be increased by 10 percentage points for medium-sized enterprises and by 20 percentage points for small enterprises;

The aid intensity shall not exceed 50 % of the eligible costs in respect of research infrastructures.

With respect to support granted for innovation clusters investment aid may not exceed 50% of eligible costs. For investments located in “Assisted Areas”, the aid intensity may be increased by 5 percentage points.

Operating aid may not exceed 50% of the total eligible costs.

The maximum aid thresholds in respect of aid granted for research and development projects are as follows:

(i) if the project is predominantly fundamental research: £34 m per undertaking, per project; that is the case where more than half of the eligible costs of the project are incurred through activities which fall within the category of fundamental research;

(ii) if the project is predominantly industrial research: £17m m per undertaking, per project; that is the case where more than half of the eligible costs of the project are incurred through activities which fall within the category of industrial research or within the categories of industrial research and fundamental research taken together;

(iii)  if the project is predominantly experimental development: £12.75m per undertaking, per project; that is the case where more than half of the eligible costs of the project are incurred through activities which fall within the category of experimental development;

(iv) if the aid for research and development projects is granted in the form of repayable advances which, in the absence of an accepted methodology to calculate their gross grant equivalent, are expressed as a percentage of the eligible costs and the measure provides that in case of a successful outcome of the project, as defined on the basis of a reasonable and prudent hypothesis, the advances will be repaid with an interest rate at least equal to the discount rate applicable at the time of grant, the amounts referred to in points (i) to (iv) are increased by 50 %;

(v) aid for feasibility studies in preparation for research activities: £6.4 m per study

Investment aid for research infrastructures will not exceed £17m per infrastructure and aid for innovation clusters will not exceed £6.4m per cluster.

Definitions

A small enterprise is defined according to Section 382 of the Companies Act 2006. To be considered small an enterprise must satisfy two or more of the following requirements:

1. Turnover: Not more than £10.2 million
2. Balance sheet total: Not more than £5.1 million
3. Number of employees: Not more than 50

A medium enterprise is defined according to Section 465 of the Companies Act 2006. To be considered medium an enterprise must satisfy two or more of the following requirements:

1. Turnover: Not more than £36 million
2. Balance sheet total: Not more than £18 million
3. Number of employees: Not more than 250

“Assisted Areas” refers to areas designated in terms of the Assisted Areas Order 2014 as amended by the Assisted Areas (Amendment) Order 2017.

‘Fundamental research’ means experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any direct commercial application or use in view.

‘Industrial research’ means the planned research or critical investigation aimed at the acquisition of new knowledge and skills for developing new products, processes or services or for bringing about a significant improvement in existing products, processes or services. It comprises the creation of components parts of complex systems, and may include the construction of prototypes in a laboratory environment or in an environment with

simulated interfaces to existing systems as well as of pilot lines, when necessary for the industrial research and notably for generic technology validation.

”Experimental development’ means acquiring, combining, shaping and using existing scientific, technological, business and other relevant knowledge and skills with the aim of developing new or improved products, processes or services. This may also include, for example, activities aiming at the conceptual definition, planning and documentation of new products, processes or services.

Experimental development may comprise prototyping, demonstrating, piloting, testing and validation of new or improved products, processes or services in environments representative of real life operating conditions where the primary objective is to make further technical improvements on products, processes or services that are not substantially set. This may include the development of a commercially usable prototype or pilot which is necessarily the final commercial product and which is too expensive to produce for it to be used only for demonstration and validation purposes.

Experimental development does not include routine or periodic changes made to existing products, production lines, manufacturing processes, services and other operations in progress, even if those changes may represent improvements.

“Feasibility study’ means the evaluation and analysis of the potential of a project, which aims at supporting the process of decision-making by objectively and rationally uncovering its strengths and weaknesses, opportunities and threats, as well as identifying the resources required to carry it through and ultimately its prospects for success.

“Research Infrastructure” means facilities, resources and related services that are used by the scientific community to conduct research in their respective fields and covers scientific equipment or sets of instruments, knowledge based resources such as collections, archives or structured scientific information, enabling information and communication technology-based infrastructures such as grid, computing, software and communication, or any other entity of a unique nature essential to conduct research. Such infrastructures may be ‘single-sited’ or ‘distributed’ (an organised network of resources).

“Innovation clusters” means structures or organised groups of independent parties (such as innovative start-ups, small, medium and large enterprises, as well as research and knowledge dissemination organisations, non-for profit organisations and other related economic actors) designed to stimulate innovative activity through promotion, sharing of facilities and exchange of knowledge and expertise and by contributing effectively to knowledge transfer, networking, information dissemination and collaboration among the undertakings and other organisations in the cluster;

“Tangible assets” means assets consisting of land, buildings and plant, machinery and equipment;

“Intangible assets” means assets that do not have a physical or financial embodiment such as patents, licences, know-how or other intellectual property.

Budget

The estimated budget of the scheme is £10m over 5 years.

Duration

The scheme will operate from 1st January 2021 to 31st December 2025.

(ML / June 2021)