It’s always tricky for tax advisers to write articles about a subject they love, knowing that the majority of the people we’re aiming it towards do not share our enthusiasm for the technical intricacies!
So here I am on a Sunday evening, with my favourite drink (Hendricks, St Germain & tonic, thank you very much), Nina Simone is playing the background (in the hope that some of her creative genius will transfer), cogitating about my next article.
Unfortunately for you, Nina’s creative genius did not transfer nor can I put a spell on you, but given Game of Thrones is on tomorrow night, it seemed like an unusual theme to work with!
Aside from the fact I think my life is pretty uneventful in comparison to GOT characters, it would appear that the overriding goal of a number of GOT characters is the desire to rule the seven kingdoms (not Jon Snow, he’s too busy pouting!).
If your business goal includes dominating the business market you trade in, here are some of the commercial and tax based considerations.
Group structures can provide a number of benefits to any entrepreneur including:
a) Legal separation of activities providing protection for established trades
b) Group purchasing power and enhanced bank lending terms
c) Brand power as a collective and increased marketability
d) New subsidiary activities financed by other group members, can benefit from the losses generated by the start-up
e) Assets can be moved around the group without tax charges arising
f) On a sale of a trading subsidiary, the capital gain generated will likely be exempt within the group structure
If you don’t want to be indebted to the (iron) bank or a spread of finance options is of interest, external investors can be attracted with the following regimes and reliefs:
a) Seed Enterprise Investment Scheme; generally for small start-up companies, restrictions exist in respect of trading activities
b) Enterprise Investment Scheme; available to larger businesses, restrictions exist in respect of trading activities and companies which have traded for more than 7 years (10 for knowledge intensive companies).
c) Investors relief; available for shares issued after 17/3/2016, qualifying shares attract a 10% capital gains tax rate following a disposal
Finding the right people to drive the business forward with you is tricky in itself, (just look at Daenerys resorting to using her dragon to win her battles). Providing equity to attract the talent the business requires can be one weapon in your armoury. This could include both HMRC approved and unapproved schemes
a) Approved schemes such as EMI provide tax advantages to both employee and company;
b) Unapproved schemes may have more flexibility than approved schemes; however, they generally attract limited tax reliefs.
4) Tax Reliefs for Innovation
Whilst Cersei’s (admittedly large) crossbow might not be considered innovative (or effective – note I may eat my words), tax reliefs exist for companies which spend a proportion of their time undertaking qualifying research and developing their next product line, these include:
a) R&D tax relief which uplifts qualifying expenditure by 130% for SMEs, further reducing a company’s taxable profits. If losses are generated, these can be surrendered for a repayable tax credit which can assist cash hungry companies, particularly in the initial start-up years.
b) Patent Box provides a reduced corporation tax rate for profits generated by registered patents
Unfortunately you won’t have the insight into your competitors that Bran Stark can bring, but fingers crossed, they aren’t like Cersei Lannister.