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In these especially difficult economic times, UK companies are looking for all the financial help from the government they can get. But pairing supports together with R&D Tax Credits can super-charge the benefits even further. Here we take a look.
SEIS tax relief acts as an incentive for investors to invest in early stage businesses by offering them certain tax advantages. In return, entrepreneurs will need to exchange equity for capital funding.
A company can raise a maximum of £150,000 through SEIS investment, while SEIS investors can invest up to £100,000 in a single tax year. This can be spread over a number of companies, with investors able to hold a stake of up to 30% in each start-up.
The big advantage here is that no capital gains tax will be due on profits earned on shares held for three years or longer. If the SEIS investment concedes a loss, investors will also be able to offset the capital loss against income. HMRC facilitates an Advance Assurance mechanism, certifying that the business complied with SEIS rules at the time of application.
Innovative start-up businesses can achieve a substantial funding injection when combining the SEIS with R&D Tax Credits. The way it works is that the company must find four investors who will invest £37,500 each. In return they will receive a 25% share in the company. Investors are then able to reclaim 50% income tax on their investment regardless of their tax rate (£18,750 of income tax relief) via their self-assessment return.
The business can then invest the £150,000 in eligible research and development work and submit a claim for R&D Tax Credits. If you would like to discuss this with us in more detail, please do get in touch.
Companies must be UK-based and have less than 25 employees. They must also have assets of no more than £200,000 and be under 2 years old. Finally, it’s essential that they trade in an approved sector (so typically not in financial or investment services).
More information and how to apply can be found on the government’s SEIS page.
Over recent months the government has launched a range of grants and loans specifically to help smaller businesses and start-ups stay afloat and to invest as necessary. These include:
In light of the COVID-19 crisis, the government launched the SBGF to support smaller businesses that already receive Small Business Rate Relief (SBRR), Tapered Relief or Rural Rate Relief (RRF).
Cash grants can be claimed by businesses that meet certain eligibility criteria, which can be spent as the business sees fit - including on innovative projects. We won’t go into the scheme in detail here, but more information around eligibility and how to apply can be found on the Gov.uk website.
The Bounce Back Loan Scheme (BBLS) offers loan support to small businesses up and down the UK who have financially struggled due to the COVID-19 pandemic. The loans are provided by specific accredited lenders to a maximum of 25% of a business’ turnover.
The loans must be repaid within six years or less, and can be between £2,000 and £50,000. They’re also interest-free and payment-free in the first year.
Again, we won't go into detail here, but the Gov.uk website has everything businesses need to know.
The Coronavirus Business Interruption Loan Scheme (CBILS) allows organisations that have suffered financial hardship due to COVID-19 to claim loans of a maximum £5 million. They are administered through the British Business Bank and are interest-free for 12 months. More information can be found on the Business Bank website.
The funding a business receives from the government at this time can be used - amongst other things - to help grow it. It’s a great way to finance new innovation, such as expanding a product line, improving products or services that already exist or developing a new product from scratch. And, once this innovative work is underway or recently completed, it may well attract R&D Tax Credits too.
Briefly, R&D Tax Credits can be claimed by any UK company that has undergone a project which sought to make some kind of advance in science or technology. The project must benefit the field in which the company operates (not just the company itself) and the outcome must have been uncertain from the start.
The relief is offered either as a reduction in your Corporation Tax or as a cash lump sum if your company made a loss. It’s generous too, with up to 33 pence in every £1 of R&D expenditure claimable. Applicable costs include staff wages, salaries and overheads, employer’s pension and national insurance contributions, materials used in the R&D process, prototype and testing costs and much more.
To find out more about R&D Tax Credits and how to claim, we recommend having a look at our R&D Tax Credits page.
Yes, they can certainly work together well. However, business grants from the government are classed as ‘state aid’ - and that can affect how much you may be able to claim.
This is where things can get a little complex, and why many UK companies come to us for help. We’ve also looked at this in our recent blog.
Although R&D Tax Credits are ideal for pairing with other government supports, the claims process is far from straight-forward. As we’ve seen, how much a company can claim once it has received state aid is not always clear, and it’s incredibly easy to make a mistake. It’s also down to claimants to demonstrate to HMRC why they believe their company is eligible for R&D Tax Credits in the first place. This is achieved through a combination of accurate accounting and a compelling written narrative report.
Don’t leave your R&D Tax Credits application to chance. At Myriad Associates we have many years’ experience in making the most successful R&D tax relief claims for our clients and are proud of our 100% success rate. We will also be pleased to advise you on how best to integrate your claim with SEIS as well as short term coronavirus supports.
Call our team on 0207 118 6045 or drop us a message.