If you are an entrepreneur and love to venture into the unknown and push the boundaries of technology then mixing R&D Tax Credits, with help from Myriad Associates, and the Seed Enterprise Investment Scheme (SEIS) could provide you with up to 83% of your funding requirements. The latest tax incentive offerings from HMRC are unprecedented. Both R&D Tax Credits and SEIS are very generous in their own right, however when they are combined together they make an incredible funding opportunity for an innovative start-up business.
The funding recipe
Serves 4+ investors & a hungry innovative start-up
Ingredients
- 1 start-up company or alternatively a company that has been trading for less than 2 years
- Investors (ideally 4 or more)
- 1 SEIS certificate (available from HMRC)
- Directors that have a passion to venture into the unknown
- A sprinkling of dedicated employees that engage in development activities
- 1 specialist tax consultancy
- 1 R&D Tax Relief claim (per year)
Instructions
- 1 Firstly, set up a new company or use an existing company that has been trading for less than 2 years, has total assets of less than £200,000 and employees 25 people or less.
- Add a SEIS certificate. You will be able to obtain this by making an application to HMRC (with the support of your tax consultant)
- Add 4 investors that each invest £37,500 in return for a 25% shareholding in the new venture. Under SEIS each investor would be able to reclaim 50% income tax relief (£18,750) on their investment irrespective of their tax rate. This means that a total of £75,000 is received back through the self-assessment return. It is important to structure the shareholdings so that no shareholder has more than 30%. A company can raise up to £150,000 in total under the SEIS incentive.
- Invest the £150,000 in development activities by adding and mixing employees that have a passion to push the boundaries of technology forward
- Bring the development activities to boil and then leave to simmer for up to 12 months (could be shorter if you need to get your hands on cash quicker!)
- Add a specialist R&D Tax Relief consultant that will analyse, prepare, optimise and then submit your R&D Tax Relief claim to HMRC
- Continue with your development activities whilst your R&D Tax Relief claim is cooling off with HMRC
- Finally, invite your investors to dinner so that they can get a taste of the £50k (£150,000 x 2.30 x 14.5%) worth of R&D Payable Tax Credits before agreeing to re-invest it in the business to support further development activities. Alternatively the investors can treat you to dinner as they would have received £75k back through their self-assessment returns.
- So in sum from the original investment of £150k into the start-up innovate business, a total of £125k (83%) has been paid out by HMRC.
We hope that this recipe has given you a little taster of the excellent funding opportunities that are available from HMRC. All that is required is a little bit of upfront tax planning to ensure that your business venture is structured to take advantage of these very generous tax incentives.