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UK tax reliefs aimed at business growth

Author

Rohan Manro

A tax adviser, Rohan successfully completed and passed his final CTA examinations (Advisory & Application and Interaction for owner-managed businesses).

Often, tax advisers are contacted in a reactive fashion – whether that is after a client has been presented with a large tax bill (happy to pay a fair share of tax… but not that fair) or following the arrival of a brown envelope from HMRC.

However, I am not here today to write about methods of saving tax, nor am I here to comment on political matters. I am here today because I have a dream…a dream that tax advisers and entrepreneurs can come together to find tax efficient solutions to growth – Yes, I said growth. Profit extraction and tax mitigation is not always the goal.

With around 2.5 million business registered for VAT and PAYE it’s no wonder that the government wants to, and has been supporting business growth. Business activity is one of the core ingredients for a thriving nation…that and a decent football team. Sadly, as the latter is a pipe dream, I will talk about the former.

Believe it or not, the Government does have a number of tax reliefs to help businesses of all shapes and sizes have access to growth. I will speak briefly of a few, but it would take days to go through them all.

Seed Enterprise Investment Scheme (“SEIS”) and Enterprise Investment Scheme (“EIS”)

SEIS and EIS provide companies with a ‘qualifying company’ status which attract investors like honey attracts bear’s – well, Winnie the Pooh anyway. The point here is that, as a private limited company, which are often managed by the owners, it may be difficult to attract real investors outside of family and friends.

An investment into a ‘qualifying company’ will provide investors with income tax relief of 50% of the value of their investment for SEIS companies and 30% of the value of their investment in an EIS company.  On top of this there are further capital gains tax benefits on the disposal of such shares where the shares are held for a specific period of time.

Although there is no fiscal benefit placed on the business owner, these schemes do allow for one’s business to become more attractive to potential investors as the risk of investment is slashed by the tax benefits.

We have recently helped a client to obtain qualifying status and are in the process of following through with the relevant paperwork so that the investors may avail themselves of their tax benefits

Research and Development (R&D) Tax Reliefs

Should a business undertake research and development activities with a view to making advances in science or technology, then the government allows the company to claim tax relief on 100% of relevant expenditure PLUS ANOTHER 130% for SME’s. Clearly, the risk and expense of undertaking research and development is high and may not always follow through with an advance – but such a generous relief would surely entice the inner Nicola Tesla’s, Elon Musk’s and Steve Jobs in us all?

Employee Ownership

The fact of the matter is that a motivated workforce is a happy workforce – and this is key for a successful business to grow smoothly. Employee ownership schemes allow for the employees of a company to obtain a stake in the success of the company and what’s more, there are benefits for all involved. With an approved scheme the employees can receive tax benefits on their acquired shares and the companies receive deductions in their profits chargeable to corporation tax for their contributions. It’s a win win – tax reliefs all round. People often overlook employee ownership; however, the effects can be very real and every businesses foundation is its workforce – An effective and motivated workforce Is one of the key requirements for business growth and development.

I won’t continue to go on but now you see, although all of the above have elements of taxation within them, the real goal here is business growth. And we as a firm are always ecstatic to help entrepreneurs grow their businesses and achieve their goals.

 

If you are at a stage in which you are looking to grow your business and would like to find our more about these tax reliefs please do not hesitate to contact us. Whether it is access to finance or appropriate structuring, please do get in contact.

 

 

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