Steve Livingston

Author Archives: Steve Livingston

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FGB002: Modwenna Rees-Mogg talks raising funding |Crowdfunding | CrowdRating

Fast Growth BusinessWe are delighted to bring you this second episode of the Fast Growth Business podcastthis week we are pleased to welcome as our guest, Modwenna Rees-Mogg, founder of leading private investor news service, Angel News, amongst other entrepreneurial ventures including a new venture aimed at entrepreneurs called CrowdRating.

This podcast is brought to you by ip tax solutions | the innovation tax specialists.

Useful Resource of the Week

Our resource of the week is Rapportive – a useful Gmail extension that brings your social media connections, such as Linkedin, directly into your inbox. It is a good way of keeping in touch with existing contacts and for reaching out to potential new connections…

Guest: Modwenna Rees-Mogg: Angel News | CrowdRating

In this conversation, we cover how Modwenna made the transition from corporate financier to entrepreneur and founded Angel News which brings thought-leadership and insights into the field of private company investment – aimed at both investors and entrepreneurs.

She penned a book on crowdfunding: Crowd Funding: How to Raise Money and Make Money in the Crowd – at a time that was arguably ahead of the curve (much of her forecasts fortunately came true!) – and has she since co-launched a new venture called CrowdRating – the ratings agency for equity crowd funding. This new venture will be of particular interest to founders and entrepreneurs who might be considering raising funding via crowd funding platforms such as Crowdcube.

Modwenna shares her thoughts and views on the private company investing landscape (including SEIS & EIS) plus her view that most founders’ investors might be closer than they think….

You can listen below or access via iTunes.

Seeking your input

Please get in touch with your questions and feedback via Twitter: @iptaxsolutions and/or #fgbpodcast

If you are a UK entrepreneur and would like to share your story, please get in touch as above. Also, if you are involved in advising entrepreneurs on building scalable businesses, we would be delighted to hear from you and to get you involved if you’re the right fit.

Subscribe to receive future episodes

You can subscribe via iTunes or find us on the BusinessN2K.com network.

Listen to this week’s podcast here:

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FGB001 – Richard Mills, CEO of Sleepcogni – Kickstarter

We are pleased to welcome Richard Mills, CEO and Founder of new UK startup Sleepcogni to the first episode of the Fast Growth Business podcast.

Before we dive into this insightful interview on launching a product business via Kickstarter, we should introduce the aims and objectives of the Fast Growth Business podcast.

Fast Growth Business Podcast – Objectives

Fast Growth Business is aimed at UK entrepreneurs and founders seeking to start up a new business with the aim of scaling to exit fast – aka a fast growth business. We’ll aim to share interviews and tips from entrepreneurs plus advice and strategies from professionals such as VCs, lawyers, accountants etc with a focus on:

  1. Raising funding – including VC, business angels (SEIS / EIS), crowdfunding e.g. Crowdcube, Seedrs etc; pledge funding e.g. Kickstarter, Indiegogo etc
  2. Building a team
  3. Scaling your business
  4. Preparing for exit

Who are we?

Being as it’s the first episode, we should explain who we are…..

The Fast Growth Business podcast is brought to you by ip tax solutions | the innovation tax specialists with a focus on:

  1. SEIS / EIS tax efficient structuring
  2. R&D tax credits
  3. Patent Box
  4. Video Games Tax Relief
  5. Other creative sector tax breaks e.g. film tax credits, animation tax relief etc

Find us at http://www.iptaxsolutions.co.uk

Or @iptaxsolutions on Twitter

(Enough about us!)

Get interactive!

Enough about us, this podcast is all about you and we want you to be as interactive as possible with your views, questions and feedback – reach out via Twitter to @iptaxsolutions and / or use the hashtag #fgbpodcast so that we can round up your tweets and perhaps give you a shout out on the podcast if you too are a fast growth UK business!

Business info tip of the day

Today we explain how you can access all UK company information e.g. annual financial accounts, free of charge. This information has been available for a while via the Companies House website; however, it has been a ‘paid for’ service. Now under a new release, users can access all of this information for free.

This can be especially useful for accessing information on customers, suppliers and / or competitors.

You can access this information via the following beta site:

https://beta.companieshouse.gov.uk/

Try it out – its very useful.

Interview with Richard Mills, CEO of Sleepcogni – launched on Kickstarter

In this interview, Richard outlines his approach to building his latest venture, Sleepcogni, and launching it via Kickstarter.

His approach to finding the right people and specialists to help him build his team is summarised plus Richard explains how the Kickstarter launch process helps focus the entrepreneur’s mind on the most important factors and how it helps ensure that momentum is maintained. Richard also explains the added benefits of crowdfunding in terms of testing product viability and building a following of fans.

You can find the Sleepcogni Kickstarter campaign here.

The campaign runs until 10 December 2015 so get over there quick to lend your support!

Looking for your input

Please get in touch with your questions and feedback via Twitter: @iptaxsolutions and/or #fgbpodcast

If you are a UK entrepreneur and would like to share your story, please get in touch as above. Also, if you are involved in advising entrepreneurs on building scalable businesses, we would be delighted to hear from you and to get you involved if you’re the right fit.

Subscribe to receive future episodes

You can subscribe via iTunes or find us on the BusinessN2K.com network.

GF012: SEIS / EIS advance assurance tax tips for Film Production companies

In this edition of the Get Funded! podcast we cover some additional tips for film production companies that may be seeking advance assurance from HM Revenue & Customs that they are a qualifying company for the purposes of raising funding under SEIS / EIS.

Further info to enclose for SEIS or EIS film company HMRC advance assurance applications includes:

  • a description of the film company’s role in the production
  • the name of the film
  • how the company secured the production
  • what other parties may be involved e.g. co-producers, SPVs etc.

We hope you find it useful – you can subscribe via iTunes here

GF011 – What is SEIS / EIS HMRC advance assurance and how do I get it?

In this episode of the Get Funded! podcast we cover the all important:

HMRC SEIS / EIS advance assurance procedure

This podcast includes the following points with practical advice:

  • Why the advance assurance application is important?
  • How you apply for it?
  • Typical lead times?
  • What could go wrong?
  • Critical info to include?

As discussed in the podcast, the advance assurance procedure is not mandatory although it is highly recommended. This is your opportunity to get HMRC’s approval that your company is a qualifying company for the purposes of raising funding and issuing shares under SEIS / EIS. Most sophisticated investors will insist on evidence of a successful advance assurance application. This is your chance to flush out any uncertainties – don’t miss it! Listen to the podcast via the player below to learn more.

You can find the HMRC SEIS / EIS advance assurance online form mentioned in the podcast here.

Don’t forget that the typical turnaround time is 4-6 weeks for HMRC to respond to your advance assurance application. To avoid unnecessary delays, you would be well advised to get all your shareholder documents (including Articles with any revisions in contemplation of SEIS / EIS investors) finalised prior to filing the application. This is because HMRC will normally want to see the documents in as final form as possible. Otherwise you run the risk that HMRC will issue a ‘partial’ advance assurance in that they will ask for sight of the final version of (say) the Articles if further revisions are envisaged – so you would have to go through the process again. Tune into the podcast via the player below to learn more.

Please subscribe at iTunes to ensure that you can pick up past and future episodes. Also, we’d be thrilled if you could leave a review on iTunes.

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GF010 – What trades qualify for SEIS / EIS + potential problems for software (saas) companies!

In this episode of the Get Funded! podcast we cover the types of trades that qualify for funding under the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS).

We discuss the HMRC excluded activities list that you need to check to confirm that your proposed trade is not listed i.e. excluded. If not, then you should be okay.

There is a relaxation for these excluded activities to be included within your trade although it must not amount to a ‘substantial’ proportion of your overall trade. ‘Substantial’ for these purposes is deemed to amount to no more than 20%. The HMRC advance assurance procedure would be key in these circumstances.

We pay particular attention to the potential problem for software companies (particularly software-as-a-service (Saas) based companies) given that the receipt of royalties or licence fee income IS an excluded activity. There is a carve-out from this exclusion for companies that create the whole or greater part of the underlying asset that generates the licence or royalty fee income –  most software companies rely on this exemption to qualify for SEIS / EIS – but there are some further traps for the unwary….

GF009 – What does trading mean for SEIS and is my trade new?

In this edition of the Get Funded! podcast we cover the thorny subjects of:

  • what “trading” means for the purposes of SEIS and
  • how this interplays with the definition of “Seed” in order to be eligible for Seed Enterprise Investment Relief?

We covered in a previous edition (subscribe via iTunes if you’ve not already!) the fact that you need to be undertaking a qualifying trade within your company if you wish to raise funding under SEIS / EIS but when is this deemed to start and why is it important?

We need to ascertain the starting point for any trade as this has important ramifications for eligibility under SEIS and it also plays into when form SEIS1 can be applied for and / or the timing of the use of the monies raised.

Frustratingly there is no definition of trading aside from the general observation that it would involve undertaking activities with a view to a profit. But what does this mean in practice?

I have discussed this with HMRC Inspectors and they tend to apply the useful anology of a new shop: whilst the new fittings are being installed and the stock is on order you would expect the sign on the front to say ‘closed’ (it is not yet trading). Once the shop is ready and the sign is turned to ‘open’ then trading has commenced.

So the question for your business is whether you are in a position to accept paying customers? This can get a little hazy for software startups, for example, applying lean startup principles and beta launches etc…

For SEIS purposes, a company must be carrying out a new qualifying trade. For these purposes the trade must be less than two years old. So you must apply the above principles to determine when your trade started. If you are using a company that was incorporated more than two years ago and there has been activity in the company within this timeframe that might point to a trade then this could cause problems. You would be well advised to seek advance assurance from HMRC and to explain the position to ensure that there are no problems. Likewise, if you are acquiring the trade from a third party company then you would need to ensure that it satisfied the two year rule.

When seeking the tax certificates for the investors this can be carried out after 70% of the monies raised has been spent or four months after the trade commenced – whichever is earlier. Again the above principles come into play.

UK Government tax incentives for each stage of a business lifecycle

Here in this BusinessN2K podcast we cover (at a canter!) the key tax incentives that are available to support entrepreneurs in building businesses from startup through to exit including:

  • What’s the best business vehicle – company, partnership or sole trader?
  • Why Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) could hold the key to your success in fundraising?
  • How to incentivise your employees tax efficently using an Enterprise Management Incentive share option scheme (EMI)?
  • How you could receive a third of your investment cash back via the UK’s SME R&D tax credit scheme?
  • How you could halve your corporation tax rate by electing into the Patent Box scheme?
  • How you could bag a 10% CGT rate on exit or even sell up tax free?

We’ll no doubt cover each of the above UK Government tax incentives in a separate podcast edition for each – but if you would like to learn more about the SEIS and EIS tax incentives then you can access our dedictated Get Funded! podcast.

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GF008 – Does your company qualify for SEIS / EIS?

Here in this edition of the Get Funded! podcast we cover the essential requirements related to your company and its eligibility for SEIS / EIS funding.

As you might expect for such a generous tax relief, it is not available to all companies – instead it is targeted at small – medium sized companies with the capacity for growth (along with a healthy dose of risk!).

The key company requirements for SEIS / EIS are as follows:

        • The company must be unquoted i.e. it must not be quoted on a recognised stock exchange. Note that the Alternative Investment Market (AIM) is okay for SEIS / EIS purposes as it is not counted by HMRC as a ‘recognised stock exchange’
        • The company must have a UK permanent establishment. Most companies will be incorporated in the UK so this isn’t normally an issue but this demonstrates that the rules are more flexible than some might appreciate – it could be an overseas company with a UK branch / permanent establishment and still qualify
        • For SEIS, the company must have gross assets of no more than £200,000 at the time of the issue of the shares – here we are concerned with total assets on the balance sheet only NOT net assets (ie after deducting liabilities). Where there are subsidiaries, these must be totalled up.
        • For EIS, the gross assets limit is £15m immediately before and £16m after the use.
        • For SEIS, the company must have fewer than 25 employees immediately before the relevant share issue
        • For EIS, the employee limit is 249.
        • The company must be carrying out a qualifying trade – the definition of what constitutes a ‘qualifying trade’ for SEIS / EIS purposes is deduced in reverse by reference to the ‘Excluded activities’ list – so if you’re not on it you should be okay! We’ll cover this in more detail in a future podcast as there are some potential traps here especially for software companies…
        • For SEIS, the company must not have received EIS or VCT monies.

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Claim EIS income tax relief if you want a CGT free disposal

Should have claimed EIS income tax reliefThere’s been a recent sorry tale of an EIS investor who invested £50k for shares in a qualifying company under EIS. All seemingly went well and he sold his shares for – what he thought would be – a CGT free disposal.

But there was a problem…

He had failed to make a claim for income tax relief on his investment which is a requirement of the EIS relief – his reasoning was that he had little, if any, taxable income in the relevant period. He was denied the opportunity to file a late claim for income tax relief so his case was dismissed – with a full CGT liability…

So the moral of the story for EIS investors is to make a claim for income tax relief on investments even if the income tax saving might appear pitiful – because the CGT saving might not be ;)

Summer Budget 2015: Key tax changes for entrepreneurs

Listen to an audio version of this Summary Budget 2015 round up of the key tax changes impacting on entrepreneurs or read the text version below:

An audio download link is available at the end of this post!

Reduction in Corporation tax

Continuing George Osborne’s pledge to make the UK one of the single most attractive places to do business in the G20 he continued with his downward pressure on the UK corporation tax rates. Not content with reducing the main rate to 20% from 28% not too many years ago, he pledged to reduce it further to 19% by 2017 and down to 18% by 2020.

Before we get too excited about the CT rate reductions, it was once again a “give and take budget” as Mr Osborne announced some far reaching changes to the dividend tax regime that will impact on many entrepreneurs and increases to the minimum wage – the now so called “Living Wage”.

Dividend tax changes

It has long been the case that entrepreneurs could extract profits from their companies as dividends rather than salary – the key advantage being NIC savings as dividends are not (currently) subject to NIC. The income tax suffered on dividends is lower than salary as dividends are only available from retained profits that have been subject to corporation tax – so a tax credit system is applied to dividends that, in essence, results in 0% income tax payable by basic rate tax-payers (so broadly up to £42,000 – £43,000); 25% of the net dividend payable for higher rate tax payers and 30.6% for additional rate tax payers.

Seemingly forgetting about the double taxation impact on dividend payments, the Chancellor announced that there will be a £5,000 dividend allowance from 6 April 2016 (whoop whoop!) and then a 7.5% additional tax applied to dividend income – so our rates now become basic rate: 7.5%; higher rate: 32.5% and additional rate: 38.1%.

Looking at the HMRC projected figures, they are looking to net quite a windfall on this change that is a tax grab via the back-door – I don’t think many entrepreneurs have quite grasped this change as it was positioned as a change that might impact on those with substantial quoted shareholdings and contractors.

Will we see larger dividend payments pre 5 April 2016 with founders leaving credit loan balances to draw down over the foreseeable future?

Employment allowance increase

We should see the £2,000 NIC allowance for employers increase to £3,000 from 6 April 2016

Annual investment allowance

The annual allowance for investment into capital equipment (e.g. PCs, servers, desks, chairs, machinery etc) was set to fall to £25,000 pa by the end of this year but this was increased and pegged at £200,000 for the next five years.

EIS restrictions

There were some further changes to EIS building on proposals from the Autumn Budget Statement that include proposals to cap the total amount that can be raised under EIS at £12m (£20m for ‘knowledge intensive’ companies).
Also, a new limit on companies raising EIS making it available only to those companies that have been trading for less than 7 years (10 years for knowledge intensive companies) – this change seems unreasonably harsh for longer more established companies that might want to access capital. The requirement for 70% of the SEIS cash to be invested before shares can be issued under EIS will also be removed as originally noted in the March 2015 Budget. Finally there was reference to ensuring that EIS funds are directed toward developing companies so there will be restrictions on using EIS monies for buyouts and acquisitions and more of a need to demonstrate that the funds are being employed to develop and grow trading companies.

There were no changes announced to the SEIS regime.

R&D tax credits

No significant changes announced for R&D tax relief aside from a restriction aimed at Charities and Universities to prevent them from claiming the R&D tax relief on work subcontracted to them. This restriction takes effect from 1 August 2015.

Buy to let landlords

Many entrepreneurs will have diversified their risk with potentially one or more buy to let properties within their portfolio. These were also hit with some quite serious changes to the tax regime with the most hard hitting being the reduction in interest relief on buy to let mortgages being reduced to the basic rate of tax only. Currently, landlords can offset the mortgage interest at their marginal rate of tax (so potentially up to 45%). These new rules will be phased in to ease the pain of potential deleveraging for some landlords but the writing is on the wall for many – and who’s to say that this is the end with potential for 0% interest relief in the future….?

There will also be the removal of the 10% wear and tear allowance from 6 April 2016. Yet more pain for landlords.

Pension changes

On the downside, there were announcements that those with total income over £150,000 would be hit with reductions in the amounts they can put into their pension with the £40,000 annual allowance being tapered away with it hitting just £10,000 for those earning £210,000 or more. This is a admin headache all round and it comes into force from 6 April 2016.

On the plus side, there was a consultation announce to explore the best ways for pensions to be saved and a seemingly open approach to considering alternative finance in line with improvements to ISAs – this is great news for our thriving Fintech sector.

Inheritance tax changes

Long discussed and unsurprising was the pledge to increase the inheritance tax level to £1m to allow homes to be passed on without incurring IHT. Slightly odd in that the £325,000 nil rate band remains in place for the next 5 years but we have this additional £175,000 especially for the family home. Inflation may start to dig a hole into that £325,000 allowance rendering this less beneficial over time than the headlines suggest.

It was a shame that we didn’t see any changes to the VAT MOSS / (#VATmess) regime and I think the changes to dividends and pensions will add to uncertainty for many entrepreneurs and their advisors as the goalposts keep moving which is disappointing.

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