What's The Difference Between 'Invention' And 'Innovation'?
We all know that technology moves fast. Invention and innovation are certainly intertwined but there are some key differences between the two. Here we look at this a little more closely.
Defining the two
It can take a bit of thinking about and it’s easy to see how “innovation” and “invention” can be muddled up. The definition of invention, according to the Cambridge Dictionary, is of “something that has never been made before”. This could be a physical thing, or it could refer to the process of creating something. Inventions must be completely new, in that nothing like it has been seen before, having been made using newly designed parts. Inventors need to be doing something completely original - a new product, scientific process or new technical idea for instance.
Innovation however is less about the physical, but about the new methods and ideas behind something. It’s how something new can be marketed or remarketed, and is likely to involve the repurposing of a product or manipulating it to make it more useful in the real world.
Of course, inventions actually need to work. Ideas are great in theory or on paper, but the finished product/process needs to have proven success - this is where innovation plays its part.
Innovators and inventors are different in that innovators may dream up something that isn’t new at all. Instead, they operate within the boundaries of what already exists working with components that can be readily sourced to work with. Innovators also use existing methods or processes that have already been tried and tested to create a commercially viable product or process that is highly marketable. They look to ignite the public’s interest in something they may well have already heard of, whilst putting their own twist on it. Being innovative depends on whether users can achieve real value from their ideas.
Take the humble motherboard
The motherboard is an essential component found in personal computers and laptops. It acts like the brain of the computer, allowing communication to flow between the many crucial parts of the system including the central processing unit and memory. The motherboard also provides connectors required for other peripherals. The point is that the motherboard was invented by someone, but by itself it’s nothing more than another random piece of tech. It’s how the motherboard can be used in other products that’s the really useful bit, and it’s this that requires innovation. The same can be said about the evolution of the Internet for example, or how smartphones came about. The technology for mobile phones has been around for many years but smartphones are relatively new. To enable access to the world wide web from our mobiles is the result of innovation; taking something that already existed and improving on it.
Innovation is not the same thing as invention - as we have seen they are two different concepts. But both the activities require a large capital investment in the research process. At Myriad Associates we have helped many of our clients to work through their R&D projects to work out where true innovation and invention lie. It’s something we can advise business accountants on too, and will be pleased to do so.
Financing innovation and invention in your business
Innovation can be expensive, often requiring a significant cash injection. Depending on the scale of the project, its aims and the types of expenditure occurring, finances can be bolstered using a variety of mechanisms including business loans, grants, equity investments and more.
If you have recently completed innovative research and development work already, one way of raising finance for further innovation is R&D Tax Credits.
What are R&D Tax Credits?
R&D Tax Credits are a government-backed tax incentive that is designed to encourage businesses to innovate. It does this by helping cover a wide variety of the costs, including staff wages, certain overheads used up in the R&D process and employer costs like NI and pension contributions. R&D projects are those which are classed as making a scientific and/or technological advancement by resolving a particular uncertainty. And we’re not just talking about laboratory work here, or blue chip pharmaceutical companies - far from it. The scheme is actually open to anyone who would ordinarily be subject to Corporation Tax.
If your company is actively working on the creation of a new product, process or service - or the significant upgrade of an existing one - then you could well have a case for a claim. The eligible related costs can also still be covered even if the project is cancelled or is ultimately unsuccessful. The scheme is generous too, providing up to 37.5% of your R&D back - and even the smallest of R&D projects can be worth thousands of euros.
R&D Tax Credits are open to any Irish business in any sector. However, there are some sectors that often come up time and again. These include businesses in engineering, aerospace, defence, manufacturing, agriculture, construction, food and drink, pharmaceuticals and software development to name just a few.
If you think your Irish business is eligible for R&D Tax Credits, why not take a look at our R&D Tax Credits page.
Why use the Tax Cloud portal?
Preparing a successful application for R&D Tax Credits can be very time-consuming and requires knowledge of niche R&D tax law that can easily tie you up in knots. Get your application wrong and at best you’ll miss out on some serious cash. At worst, you could end up with a tax investigation courtesy of the Revenue.
The Tax Cloud portal was designed by the R&D specialists at Myriad Associates to offer an excellent value, end-to-end R&D Tax Credits claim service. Complete with the in-built Tax Cloud calculator you can put in your own company’s figures and get the ball rolling today.
- Submitting R&D tax claims since 2001
- 100% success rate
- Over €100m claimed and counting
- Industry leading specialists
- In-house technical, costing and tax experts
- Member of the Research and Development Consultative (RDCC) committee
Meet some of the team behind Tax Cloud