Tag Archives: tax

SEIS Seed Enterprise Investment Scheme

2012 Budget SEISAs promised the chancellor has confirmed in his March budget documents that there will be a Seed Enterprise Investment Scheme (SEIS) starting from 6th April 2012, although it didn’t get a mention in his actual speech.

Just to clarify for anyone confused by the similarity of SEIS with an existing scheme, there is already an Enterprise Investment Scheme (EIS) which targets larger businesses rather than start-ups.

This big brother to the SEIS also received good news in the budget, with the qualifying size of a company moving from a maximum gross asset size of £7 million with 50 employees, to £15 million with 250 employees. This means later stage investment prospects will now qualify for EIS (see EIS for more information).

The basic information that I covered on my last blog on the SEIS remains unchanged, so I won’t go over that again. Suffice to say it is worth ensuring that your new business qualifies (not all industries do – eg. Property development and financial services) and publicise to potential Investors that they can get tax relief by investing in your business.

Clearly for Investors it’s a no-brainer that you should utilise this new scheme for your investments.

So how do you make use of it?

Luckily those nice people at HMRC have put together a fairly comprehensive web-page that explains the SEIS and how to apply for it. See http://www.hmrc.gov.uk/seedeis/index.htm

They are careful to say that although the scheme starts on the 6th April, until the budget gets Royal Assent (around July) it isn’t set in stone, but it’s unlikely to alter in my view.

The HMRC web-pages have a section on how to get advance assurance that your business and the shares that you are going to issue to an Investor will qualify. It can be useful to do this in making your opportunity attractive.

 

Enterprise Zones – what are they and will they help?

Enterprise ZoneEnterprise Zones are the latest government incentive to get businesses growing. Within the Enterprise Zone you can get superfast broadband, lower rates & taxes, and low levels of regulation & planning controls.

That can only be a good thing – right? A great encouragement for younger companies who may otherwise struggle to reach critical mass.

Maybe, however there is considerable criticism of this approach also. Firstly it’s not new. Maggie Thatcher tried exactly this in the 1980’s. They provided a boost at the time that wasn’t able to be sustained.

Critics argue that all the Enterprise Zones do is to displace jobs from one area to another, with up to 80% of the jobs they create taken from other places.

Also that they are expensive, with estimates ranging from £23,000 to £50,000 per job created.

Having said that, if you are looking to expand your business (the zones will be most useful for businesses that have been going for two or three years, and are looking to expand and inhabit their first business premises), is there a benefit to doing so in a Enterprise Zone rather than elsewhere?

Probably yes. One of the main benefits that the zones will offer is a business rate discount worth up to £275,000, or enhanced capital allowances for plant and machinery where there is a strong focus on manufacturing, over a five year period. That coupled with the other advantages of infrastructure and support can make it attractive.

So where are these Zones? They are not all in areas needing regeneration, another criticism, but are areas with the most potential for growth and those which could attract inward investment from abroad. The government has announced the following areas will get an Enterprise Zone:

Bristol;
Liverpool;
Birmingham;
the Black Country;
the Tees Valley;
the West of England;
the North East;
London;
Manchester;
Derby;
Nottingham;
Humber Estuary Renewable Energy Super Cluster;
Daresbury Science Campus in Warrington;
Newquay AeroHub in Cornwall;
The Solent Enterprise Zone at Daedalus Airfield in Gosport;
MIRA Technology Park in Hinckley, Leicestershire;
Rotherwas Enterprise Zone in Hereford;
Discovery Park in Sandwich, Kent, and Enterprise West Essex in Harlow;
Science Vale UK in Oxfordshire;
Northampton Waterside;
Alconbury Airfield, near Huntingdon in Cambridgeshire;
Great Yarmouth in Norfolk, and Lowestoft in Suffolk.

Interestingly, it is difficult to then get further detail on each and how to apply to be in one. These are being managed by each Local Enterprise Partnership (LEP), so the first step is to contact one of these. You don’t have to already be working or living in the area, if you are prepared to move your business there.

Resources that may help:

Map of the Local Enterprise Partnerships (LEP).

Contact details for the Local Enterprise Partnerships (LEP).

 

Spot checks by tax inspectors

HMRC inspectionI wonder if anyone you know has been the victim of these? Various business journals have been mentioning for some time that the Inland Revenue has decided to target small companies. On the belief that such businesses would have poor record keeping and so would be able to have more tax squeezed out of them.

It flies in the face of the government’s pledge to reduce the burden of red-tape and to encourage entrepreneurship, but the HMRC is a law onto itself. Literally. As long as they are effective in raising money, they seem to be able to make their own rules.

But is targeting 1000′s of small companies a cost effective exercise given the small payback for the amount of time needed to do such investigations? Probably not, so the major benefit must be thought to discourage abuse of the system and encourage SMEs to pay fully all tax.

Most small businesses I know though are not run by greedy Arthur Daleys, but by hard working owner managers, who try their best in filling out the endless Companies House, VAT, PAYE, National Insurance and annual returns forms, but inevitably may not tick all the boxes in the right place or have kept 6 years records.

If these entrepreneurs make a error they don’t realise it at the time, so the punitive measures mentioned above are not likely to cause a change of behaviour. It all seems a waste.

But today I received a letter from my accountants suggesting I take out insurance that would cover their costs in the event of a investigation by HMRC. I’m not sure if it is just a scare tactic in order to drum up commission from the insurance providers, or if it is another sign that these investigations are generally increasing. Certainly the cost of dealing with a tax inspection worries me more than the likely outcome.

Hmm, should I take the insurance or live to regret not doing so – a dilemma.

 

Little known advantages of owning a business.

Small business tax refliefYesterday’s budget reminded me that there are still considerable tax benefits to owning your own business, beyond the normal personal tax choices of taking salary, or dividends.

The Chancellor has for a start not only continued with the Entrepreneur Relief Rate of 10% but expanded it up to a value of £5M. Now many entrepreneurs busy beavering away on growing their business, may not even know about this advantage. But if your hard work and persistence results in a successful business, you may want to sell it, or even just retire from it at some point.

When you do sell it, instead of paying the current Capital Gains Tax rate, you can just pay 10%. That’s a fantastic benefit and most people are not aware of it. There are of course certain requirements you must meet, such as at least owning 5% of voting shares in the company for longer than a year, so check with your accountant.

Interestingly it also includes selling just a share of the business, business property (not letting properties though) and your own property that may have been used for a business, so lots for an accountant to have fun with.

There’s more… how about not paying any Inheritance Tax (IHT) on a major asset left to your children, partner or beneficiary of your will? That is exactly the case with a business. If you leave your business to someone when you die (sorry to be morbid, but it’s important), the beneficiaries pay no tax on it.

Given you’ve worked hard to build the business up, it’s comforting to know that if the worst happens, your family or dependants could inherit that business without giving the taxman part of it. Not the case with most other assets.

There’s just a couple more reasons for being an entrepreneur and for a change hard work does get it’s rewards.