The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies.
The Seed Enterprise Investment Scheme (SEIS) is designed to help small, early-stage companies raise equity finance by offering tax reliefs to individual investors who purchase new shares in those companies. It complements the existing Enterprise Investment Scheme (EIS) which offers tax reliefs to investors in higher-risk small companies. SEIS is intended to recognise the particular difficulties which very early stage companies face in attracting investment, by offering tax relief at a higher rate.
If you are looking for Crowdfunding, investors will be looking for your business to have Advance Assurance from HMRC for SEIS or EIS.
In order to get advance assurance your will need..
The key rules for SEIS:
- Maximum of 25 Employees
- Maximum of £200k Gross Assets
- Maximum SEIS £150k
- Any trade being carried on by the company at the date of issue of the relevant shares, must be less than 2 years old at that date
- The company must not be controlled by another company or another company and any person connected with it, and there must be no arrangements in place for it to be controlled by another company
You can get advance assurance for HMRC by clicking here
The Consumer Rights Act 2015 came into force on 1st October 2015
The Act will make it easier for consumers to know their rights and to shop with confidence, by streamlining 8 pieces of legislation (including Sales of Goods Act, the Unfair Terms in Consumer Contracts Regulations and the Supply of Goods and Services Act) into 1.
Key changes include:
- this will be the first time that consumers have had clear legal rights for digital content – specifically, the Act gives consumers the right to repair or replacement of faulty digital content such as online films and games, music downloads, and ebooks
- a 30 day time period to return faulty goods and get a full refund, the law was previously unclear on how long this period should last
- after 30 days, retailers have one opportunity to repair or replace any goods and the consumer can choose whether they want the goods to be repaired or replaced – if the attempt at a repair or replacement is unsuccessful, the consumer can then claim a refund or a price reduction if they wish to keep the product
- for the first time there are clear rules for what should happen if a service is not carried out with reasonable care and skill or as agreed with the consumer – the service provider will have to put the service right in line with what was agreed or, if that is not practical, must give some money back
- consumers being able to challenge terms and conditions which are not fair or are hidden in the small print
When a problem does occur, it will be easier for disputes to be settled. From 1 October 2015, certified Alternative Dispute Resolution (ADR) providers will be available to help when a dispute cannot be settled between the business and the consumer. The system offers a quicker and cheaper way of resolving disputes than going through the courts.
Businesses need to maksure their staff understand the new rules to avoid problems!
Gillian Guy, Chief executive of Citizens Advice said:
Businesses have a real opportunity to show they value their customers by upholding their new rights and signing up to an alternative dispute resolution scheme. This means people have an independent body they can raise a complaint with if they haven’t managed to resolve their issue with the trader.
Its really important to get your contracts right as fees and pricing, as well as other important terms in a contract, must now be both prominent and transparent. If a charge was hidden away and not brought to your attention, then a company won’t be able to enforce it.
A record breaking 581,173 businesses were registered with Companies House in 2014 showing an accelerated increase on previous years with 526,447 and 484,224 recorded in 2013 and 2012 respectively.
In 2014 the UK had the fastest growth in Self Employed workers in Western Europe!
So what should start ups do to pay less tax?
- Choose the right business structure for your business – most businesses start out as sole traders but once they start making profits convert to limited companies, this is because sole traders pay more tax than company structures
- Choose the best VAT Scheme you might be better off with Flat Rate or Cash Accounting
- Get an Accountant and use accounting software – the penalties and fines for getting your tax wrong can be huge!
- Employ your family – Children can legally work from the age of 13 which means they can perform activities which are relevant and justifiable in your business. Each member of your family has a tax free allowance of £10,600 (2015/16).
- Avoid earning more than £100,000 – For all ages, the personal allowance reduces where taxable income is above £100,000 – by £1 for every £2 of income above this limit, so that the personal allowance is lost once taxable income exceeds £121,200 (2015/16).
- Pay into your Pension – Currently you can pay £40,000 per year into to your pension
- Pay Dividends – Generally directors will take a low directors fee and the rest of their income in Dividends
- Claim Expenses – You may well have an office at home and use your car for business
- Use Company Assets – Sometime the Benefit in Kind Tax works in your favour, so you could get the business to buy the assets for you to use for example a commercial vehicle or computer equipment
- Buy Assets – You should be able to buy assets with a loan or on credit but you will get the tax relief as soon as you take ownership
R&D Relief is a Corporation Tax relief that may reduce your company or organisation’s tax bill.
Alternatively, if your company or organisation is small or medium-sized, you may be able to choose to receive a tax credit instead, by way of a cash sum paid by HM Revenue and Customs (HMRC)
But your company or organisation can only claim R&D Relief if it’s liable for Corporation Tax.
The Small and Medium-sized Enterprise Scheme
This scheme has higher rates of relief. Since 1 April 2015, the tax relief on allowable R&D costs is 230% – that is, for each £100 of qualifying costs, your company or organisation could have the income on which Corporation Tax is paid reduced by an additional £130 on top of the £100 spent. It also includes a payable credit in some circumstances.
The Large Company Scheme
If your company isn’t small or medium-sized, then you can only claim under the Large Company Scheme.
Since 1 April 2008, the tax relief on allowable R&D costs is 130% – that is, for each £100 of qualifying costs, your company or organisation could have the income on which Corporation Tax is paid reduced by an additional £30 on top of the £100 spent. If instead there’s an allowable trading loss for the period, this can be increased by 30% of the qualifying R&D costs – £30 for each £100 spent. This loss can be carried forwards or back in the normal way.
Government Statistics show a steady growth in claims
Construction Examples of R&D
- The investigation into the removal of contamination from sites, including land remediation
- Advancements in structural techniques that aid construction relating to unusual ground conditions
- The innovative use of green or sustainable methods and technology
- Development or adaptation of tools to improve efficiency
- The use of new or unique materials, e.g. recycled products
- Improvement on existing construction methods or development of new ideas to solve ongoing issues related to the site environment or project specifications
- Innovative architectural design
IT Systems Examples of R&D
- The design, construction and testing of systems, devices or processes e.g. new hardware or software components, digital interface and control systems
- Integration of legacy and new systems e.g. following a corporate merger or acquisition, the adoption of an Enterprise Architecture or externally with partners in joint ventures
- Advances in network management and operational tools, development of wired or wireless technologies, designing mobile and interactive services, evolution of new generation network switching and control systems
- Data intensive activities e.g. the collection, storage and analysis, distribution and retrieval. Defining or working with new or emerging data models and metadata standards, integration with third party content
These examples and more are shown on the Cost Care Website
There are also examples by Industry on the Alma CG website
These are the key questions that you will be asked when requesting an R&D Tax Credit from HMRC:
- How was it decided that R&D had taken place
- A description of the scientific & technological advance sought
- The uncertainties involved
- How and when the uncertainties were resolved
- Why the knowledge being sought was not readily deducible by a competent professional
- Were any grants, subsidies or contributions received for the project within the claim
- Who owns the Intellectual Property of the products resulting from the R&D
- Was the R&D carried out for others ie clients, this could mean your claim is rejected
This HMRC Spreadsheet will help you calculate your Claim