Audio technology innovator enjoys global export boom
What began as a solution to creating the noisy, vibrating cockpit of a helicopter in a training simulator has been developed by Amina Technologies into invisible, built-in speakers delivering high quality audio sound around a home.
The company was set up in Huntingdon, Cambridgeshire – once the centre of sound engineering – by its current managing director Richard Newlove.
Innovative engineering has seen the company’s product move from large commercial installations to plaster-over speakers that can be fitted as part of new home fit-outs. As the business has grown, professional financial advice has enhanced the commercial performance of the company.
Today Amina Technologies can lay claim to being the world’s leading manufacturer of invisible speakers, with a team of 23 and exporting to 36 countries worldwide.
Installations range from glass atriums seven storeys high in large corporate buildings to the fitting-out of 250 domestic apartments with speakers hidden within the walls.
Through much of the company’s history, strategic accountancy advice has been provided by Alistair Hunt, a partner at Saffery Champness based in Peterborough.
The firm provides a range of services that include UK and international taxation, share option advice to retain key staff and ways to utilise government incentives to encourage UK innovation and retain intellectual property within the country.
Speakers from Amina Technologies look simple, yet they are based on revolutionary audio science, which, in Richard’s view, makes them more akin to a fine musical instrument such as a violin.
Whilst novel and groundbreaking, for a relatively small business, the financial burden of patenting discoveries was not cost effective. The change in government policy to encourage the retention of intellectual property in the UK with the Patent Box legislation meant that Alistair was able to challenge Richard as to whether patents now offer value for money when tax savings are considered.
“Gaining a patent on any integral component of a product, such as a speaker, reduces corporation tax from 19 per cent down to 10 per cent on profits from that product’s sales under the ‘Patent Box’ legislation.
“This is an initiative launched by UK government four years ago that aims to encourage innovation and retain such technology within the UK,” explains Alistair.
Today Amina Technologies has been awarded several patents with more pending. Besides the reduced taxation, it also means that Amina inventions are less likely to be copied by competitors bringing commercial as well as taxation advantage to the business.
Altogether Amina has successfully managed to cover the great majority of its output with patented technology, creating a major boost to the bottom line.
Richard commented: “For small companies with niche technologies this is probably straightforward, given a little bit of time. I would advise any company to get involved as soon as possible.
“The benefits of patent box tax reduction will last as long as the patented technology is used in product sales. That could be 20 years.”
Creating patentable components requires significant investment in research and development. Throughout the life of Amina Technologies, Richard has ploughed significant proportions of annual profits back into the business.
Growing a successful and sustainable business is one of his key drivers.
Again, the Saffery Champness team has helped with the claiming of Research and Development tax credits to reduce the tax take and enable extra R &D investment.
“R & D tax credits can make a significant difference to the bottom line,” explains Alistair. “However, optimising the benefit requires attention to detail in recording and accounting. Many businesses merely look at the direct costs such as equipment purchases and direct staff costs.
“In fact, the scope is much wider and can include management costs, premises and more. It also highlights the need for a review of how owners are rewarded.
“Shareholders often receive a significant part of their income via dividends based on a historical view that dividends are more tax efficient than salaries. However, while R & D costs that can be considered include salaries, dividends are excluded. One of the biggest costs to claim may be the owners’ time in the R & D process and that can only be beneficial if they are paid salaries.
“Therefore, some detailed consideration is needed, especially as the benefits of dividends over salary have been significantly diminished.”
Optimal use of R & D credits has enabled Amina Technologies to reduce corporation tax and thus invest yet more into its development activities. Of course, creative research requires creative team members.
For Richard, effective rewards for his team are a high priority. Not least because he wants to engender a sense of engagement and ownership beyond an employer-employee relationship.
Once again, the accountants have offered a solution through an Enterprise Management Incentive (EMI) scheme that can be used to incentivise key people to remain within a business.
“The EMI encourages team members to stay with Amina by formally recognising that they will be rewarded for doing so,” says Richard.
EMI is especially effective for locking in teams of four to five people. It avoids giving shares to employees and the loss of control that results, as well as the complexities of remuneration planning with minority shareholders. The employees are able to benefit from EMI gains under Entrepreneurs Relief at 10 per cent rates of tax.
Not only has Amina Technologies grown in scale, it has expanded in terms of its geographic trading reach. Today, the company is exploring setting up its own sales operations in several countries, rather than depending totally on in-country distributors.
However, this will bring another set of commercial and fiscal challenges. Saffery Champness is a member of the Nexia International network and has provided Richard with advice to avoid the fiscal minefields that exist overseas and how to remit the profits to the UK.
Together Richard Newlove and Alistair Hunt, supported by Saffery Champness have formed a great team.
As Richard says: “I’m an engineer first and foremost and I’m pretty good with numbers. However, it’s great to have the team at Saffery’s on hand to advise me on the intricacies of taxation law and give me advice on the practical ways I can incentivise my team – while also keeping our innovative technology working as tax efficiently as it can be.”
Richard Newlove, managing director of Amina Technologies