The Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS)

Through the Seed Enterprise Investment Scheme (SEIS), investors, including directors, can receive initial tax relief of 50% on investments up to £100,000 and Capital Gains Tax (CGT) exemption for any gains on the SEIS shares.

The Seed Enterprise Investment Scheme targets brand new companies, so the loss relief element shared with EIS is a huge advantage. For example, if you pay tax at 45% and make an investment of £10,000 that fails completely, you only lose £2,750 due to the tax relief.

That – alongside other benefits – is what makes SEIS so attractive to investors and why we encourage all entrepreneurs to seek advance assurance from HMRC that they are eligible.

The benefits of SEIS tax relief

  • Income tax relief – Up to 50% income tax relief on investments up to £100,000 per tax year.
  • Loss relief – If the shares are disposed of at a loss, you can elect that the loss be set against any income tax of that year or of the previous year.
  • CGT disposal relief – Any gain is Capital Gains Tax (CGT) free if the investment is held for at least three years.
  • CGT reinvestment relief – 50% of capital gains are exempt from CGT if it is re-invested in a SEIS-qualifying company.

Which companies may be SEIS eligible?

Companies may qualify to raise funding through SEIS if they:

  • Are less than 2 years old

  • Have less than £200,000 in gross assets

  • Have less than 25 employees

Who can claim SEIS relief?

To qualify, you must be a UK taxpayer at the time of investment.

Like EIS, there are two main restrictions to SEIS eligibility, both relating to whether you are connected to the company or become connected during the period of your investment. This applies for up to 2 years before and 3 years after the investment. This “connection” can take two forms:

1) Connection by financial interest

You are not eligible if you control the company or hold more than 30% of the share capital or voting rights. All relatives except siblings are included within these restrictions.

2) Connection by employment

If you are an employee or partner of the company, connected with it and therefore not eligible. The same goes for associates, including business partners, trustees and relatives.

Unlike EIS, SEIS guidelines do not consider directors as employed by the company. This means that if you are a director of the company you are investing in and are not connected by financial interest, you can still apply for SEIS relief.

For more information, please see the HMRC website.

How to claim SEIS

For clarity, all steps in the process are included here, including what goes on behind the scenes on the part of the company and HMRC:

Make sure that the company qualifies for SEIS. The company must fulfil the criteria above (“what companies may be SEIS eligible”). If the company is eligible, they will be listed as ‘SEIS’ on Crowdcube

Confirm the company has ‘Advance Assurance’. This is a certificate emailed to the investor by HMRC confirming that investors will benefit from SEIS. This isn’t a requirement, but it’s best practice to make sure.

Make the investment. The investment must be in ordinary shares worth no more than 30% of the company, bought in cash.

Wait to receive your SEIS3 form. The company will submit form SEIS1 to the Small Companies Enterprise Centre (SCEC) of HMRC. Once the SEIS1 has been reviewed and the requirements met, the SCEC will issue a form SEIS3 to the company, who passes it on to each investor.

Use the SEIS3 form to claim tax relief. This differs slightly depending on whether you submit your own tax filings:

  • If you are submitting your own tax filings, you don’t need to send the SEIS certificate to HMRC along with your return – only if they request it.
  • If you aren’t submitting your own tax filing, you need to complete pages 3&4 on the SEIS3 form and send them to the office that deals with your PAYE. You can find this information on any previous correspondence you may have received from HMRC. Your employer should also hold this information.

When can you claim SEIS?

FromFour months after the business began trading.
UntilFive years after 31st January in the tax year after you made the investment. So, if you made the investment in the 2020 tax year, you can claim SEIS up to 31st January 2026.

Contact Zyla Accountants today for support with accessing the Seed Enterprise Investment Scheme (SEIS) for your business. 

How can your business maximise R&D tax credit benefits?

How can your business maximise R&D tax credit benefits?

This week in Small Business, Mark Joyner of RDS shares his knowledge of R&D tax credits, outlining just who can apply and what they could expect to receive. This is a very interesting article that we wanted to share with you, highlighting the missed opportunity for businesses across the UK. 

Despite being described as a flagship scheme to stimulate the economy, conservative estimates show that a staggering 97 per cent of those companies eligible for R&D tax credits are not currently engaged with the scheme.

Small businesses across the UK could be benefitting from significant investment back into their companies through the HMRC tax incentive, but for many reasons, the majority are not claiming.

About tax credits

The HMRC Research and Development Tax Scheme was created in 2000 to encourage business innovation and stimulate the economy. Businesses that can demonstrate an attempt to innovate, bringing a new product or a bespoke service to market, can claim thousands back in tax relief, which can be offset against corporation tax.

Chancellor Rishi Sunak recently announced plans to widen the scheme further, ensuring businesses receive even more back against their investment, as well as widening the criteria to make more IT/software claims eligible.

The overall aim is to increase UK R&D expenditure to 2.5 per cent of GDP by 2024.

But figures show that the scheme is greatly underused as is evident from the low percentage of claims. It’s thought that less than £1bn of relief against more than £25bn spent on R&D in the UK.

The question is, why?

The majority of our clients simply don’t have the time to look into it, or don’t believe they would have the time/resources to manage the process through to completion.

Awareness is an issue too. Some of our most successful clients had never heard of the scheme before engaging us. Many others doubt its authenticity. And there is also some weight to the notion that the scheme is overly complicated, but of course companies like ours are on hand to help with all of the above.

Who can claim for a tax credit?

Any UK limited business can claim for R&D. There are no restrictions on the type or size of business, although the scheme differs depending on whether a business fits HMRC’s definition of a SME or large company.

Eligibility is focused on the research project rather than the type of business. The product or service doesn’t have to be finished or even successful. The research/development phase is often enough for you to qualify, but it does have to be entirely new – it cannot be an off-the-shelf solution.

For the SME scheme, a company must employ fewer than 500 people and have a turnover of less than £85m or a balance sheet total of less than £73m. An SME’s eligible R&D costs receive an additional 130 per cent deduction when calculating the taxable profit.

R&D project criteria to be aware of…

The project must relate to a company’s trade, and you must be able to explain how the project:

  • Looked for an advance in science and technology
  • Had to overcome uncertainty
  • Tried to overcome this uncertainty
  • Could not be easily worked out by a professional in the field

Broadly the following R&D activities qualify:

  • Software development
  • Designing new products
  • Precision engineering
  • Products with new materials
  • Enhancing existing products or technologies
  • Typical R&D expenditures can cover:
  • Staff costs
  • Subcontractor costs

What is an R&D claim worth to your business?

Our average claim currently stands at around £53,000, but when the new changes announced in the Spring Statement come into play this is likely to rise further.

Specialist firms such as our own will interview SME clients, prepare the returns, and charge a fee only against successful credits.

Some recent examples of R&D Tax Credits from our own portfolio of 120 SME clients include a fleet management firm from York receiving £50,000 over consecutive years, and a modular portacabin firm which received almost a £68,000 boost in one year alone.

Having worked in this arena for five years, it still surprises me how many SMEs aren’t taking advantage of the scheme. Companies can benefit from thousands of pounds to reinvest in their businesses, through a successful corporation tax reclaim and from thereon in annual reductions on future corporation tax bills. It only takes 15 minutes to ascertain if you’re eligible so for me it’s a no brainer.

Contact Zyla accounts today for support with your claim today. 

Suzy Kerton, founder of Zyla Accountants featured in CA Magazine May 2022

Suzy Kerton, founder of Zyla Accountants featured in CA Magazine May 2022

We’re pleased to announce Suzy Kerton CA has been featured in the latest edition of CA Magazine, provided by ICAS. Its 23,000 Members and 3,700 CA Students form a leading business community that spans industries and time zones and is packed with local heroes and corporate leaders.

Find out how our director Suzy Kerton CA founded Zyla Accountants with a goal of prioritising client experience. She spoke to Fraser Allen on how technology and financial education helped put theory into practice. Suzy discusses her clients requirements, technology and how she is developing new ways to communicate with her client base.  

Read the article:

You can read the latest copy of CA magazine here. Suzy is featured on page 38:!meet-the-practice

Suzy Kerton - CA Magazine 2022 Article

Meal planning and shopping platform Lollipop secures £5m in seed round

Meal planning and shopping platform Lollipop secures £5m in seed round

The latest fundraise, led by Octopus Ventures, follows a pre-seed round carried out in December 2020.

Lollipop, the smart personal shopping assistant, has raised £5 million in a new seed round led by Octopus Ventures.

The funding will allow the company to build out the product (currently in beta) across the whole journey of feeding the family including meal planning, shopping and cooking.

Lollipop’s product works by allowing shoppers to add recipes, build custom meals and even import external recipes to their baskets in just a few seconds. Personalised intelligent ‘playlists’ can also be created so remaining household essentials can be added to the basket in an instant.

The company has partnered up with a range of brands including BBC Good Food and Sainsbury‘s for the recipes.

According to the startup, this is the first time that a holistic approach has been taken to grocery shopping with support at every stage from providing meal inspiration, to achieving health goals, and supporting in the kitchen.

Recipe recommendations are tailored based on users’ dietary and lifestyle preferences in-order to personalise the shopping experience for busy families. The company’s partnership with Sainsbury’s ensures dependable delivery covering 98% of the UK with a range of over 30,000 high quality items at a low cost.

“Getting the shop done and the family fed is already tough. As living costs rise, it is only getting harder for overwhelmed parents trying to eat healthily, live sustainably and stick to a budget,” Lollipop founder Tom Foster-Carter said.

“Tracking your family’s nutritional intake and what’s left to use up in your cupboards should be as effortless as tracking your money on Monzo. That’s what we’re building at Lollipop.”

“I’ve personally spoken to dozens of parents lumped with the shopping and cooking for their households and it was heart-wrenching hearing how lonely they found the experience and how many wished they had some help. This is why community was core to our product from the outset.

“We’re so lucky to have an amazing group of Lollipop Pioneers who support each other and provide us with invaluable feedback every day (along with mouth-watering photos of what they’ve just cooked!).”

Sainsbury’s head of digital strategy Mathew Roberts added: “We are pleased to partner with Lollipop in this new venture.

“They share our commitment to help everyone have access to great value, healthy food and we are fully behind everything they are doing to support families across the UK.

“Lollipop uses technology in an innovative way and we look forward to working together to bring great value, innovative food to more customers.”

Ten ways to keep ahead of the competition

Ten ways to keep ahead of the competition

Business competition can be fierce, especially in fast-moving markets where customers often shop around. Use these ten ideas to defend your market position and build your competitive advantage

1. Know the competition

Find out who your competitors are, what they are offering, and what their strengths and weaknesses are. This will identify the areas you need to compete in, and give you a platform for differentiating yourself.

Where other businesses are doing better than you, what can you learn from them? Where the competition is weaker, what should you be doing to make the most of the opportunity?

2. Know your customers

You are competing to attract and retain customers – so you need to understand what your customers (and potential customers) value.

Customer expectations can change dramatically. Find out what matters to your customers now – is it lower price, a premium service or the latest products?

Use what you know about your existing customers to get a better understanding of what kinds of customers find your offer most appealing. This helps you define your target market and the market segments where you are most competitive.

3. Have all your information in one place

Dedicated CRM systems allow you to join up your sales and marketing data with other records, such as accounts, stock-keeping and delivery. That way you can know everything about a customer’s dealings with your firm – from whether their goods arrived on time to whether they are a late payer – helping you provide more efficient, personalised communications and service.

The best CRM software for your business depends on what your particular needs are. For example, you might be focused on marketing to new sales leads, or on building relationships with your most important customers and making sure you give them quality service. The more sophisticated packages offer advanced analysis and automation tools, which can be particularly useful if you are trying to manage a large number of contacts.

4. Differentiate

It’s essential to give your customers good reasons to come to you rather than a rival. Develop a unique selling point (USP) that taps into what customers want. It should be clear and obvious – no-one should have to ask what makes you different.

Differentiating yourself from the competition makes it easier to promote your business. You can win customers because of what’s special about your offer, rather than competing on price.

5. Step up your marketing

Make more effort to tell people who you are, what you sell and why they should buy from you. It doesn’t have to be expensive – cost-effective promotional ideas include everything from leaflet drops to campaigns on social media.

Aim to tie everything together in a sustained marketing campaign, where you are consistently putting out the same key messages to your target customers. By doing this, you help customers get a clearer picture of what you can offer and how you are better than the competition. And you make it more likely that customers will see your marketing or remember you when they are ready to make a purchase.

6. Update your image

Simple steps such as painting the front of your premises can make your business look more modern and inviting. Look at your business cards, social media presence, your website, branded packaging and so on. Does your image reflect your USP?

Over time, your image can easily become outdated, as customers change what they look for and competitors up their game. Do things feel fresh and exciting, or is your business becoming tired? Does your image still reflect how you want customers to think of you now?

7. Look after your existing customers

It can be easy to take loyal customers for granted, but they will be your competitors’ target market. Don’t give your customers a reason to look for alternative suppliers.

Improve customer service by being more responsive to their needs and expectations. Consider offering low-cost extras such as improved credit terms, discounts or loyalty schemes. It’s cheaper and easier to keep existing customers than to find new ones.

8. Target new markets

Selling into new markets can increase your customer base and spread your risk. Are there other potential customers similar to your existing target market? Could you reach a wider audience by selling online or overseas?

Make sure you tailor your offer to each different market segment. Don’t assume that what has worked with your existing customers is necessarily the best approach. Make sure you understand what different groups of customers really want, what the competition is currently offering them, and how you can win their business.

9. Be the best employer

Skilled, motivated employees underpin vibrant, growing businesses. Attracting them means more than paying a competitive wage. People are often more impressed by a good working atmosphere, and benefits such as flexible working and structured career development.

Motivated employees put more effort into making sure customers are satisfied. And customers respond to dealing with people who have a positive attitude about the business they work for.

10. Look to the future

Businesses that plan for growth are more successful than those that stand still. Keep up with developments in your sector, follow consumer trends, invest in new technology. Have a clear idea of where you want to be in one, three and five years’ time.

Other businesses will be continually improving what they offer. You need to do the same if you are going to stay one step ahead of the competition.

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