Get Funded!

Here's a short update on a new requirement that HMRC has introduced in relation to Advance Assurance applications.Applications must now include reference to the prospective investors to demonstrate that your application is not "speculative" in nature.You can watch above or listen below :)

Tide is a new challenger bank that aims to offer hassle free banking with the potential to set up a business account online within just 5 minutes.​Here we chat to Dan from Tide on how this new offering might help fast growth companies including:

Hassle-free set up using the Tide app - get a sort code and bank account number within 5 minsSimple charge structure - no annual fees - 20p per transactionMastercard issued for usersAccount transaction classification, notes, uploadsIntegrations coming down the pipeline incl with Xero etcUser permissions / accountant read-only access etc on its wayInternational transactions and foreign currency accounts on their wayStrong experienced team and financial backing behind Tide

Get 3 months free

banking by using the Partner Code: IPTAXOr visit our partner link: https://www.tide.co/ip-tax-solutions

I can see this filling a gap, especially for startup companies looking to set up accounts quickly in anticipation of fundraising under say SEIS or EIS.Also, on the face of it there looks to be little benefit in holding out for an account with a more traditional bank - especially given the added features that Tide offers (unless you anticipate a significant number of monthly transactions).Check out the podcast below and let me know your thoughts...P.S. Please subscribe and leave a comment on iTunes :)

Bonus Edition: Here is a re-run of a conversation we had on a related podcast (Fast Growth Business) which we thought listeners of the Get Funded! podcast would also benefit from as it includes discussion around SEIS / EIS.

SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) are tax advantaged funding options aimed at enticing angel investors to invest in early stage and fast growth private companies. They provide a great way for you to secure funding for your company.

These tax reliefs apply where you issue shares in your company in exchange for a cash investment from angel investors. The angel investors receive some downside protection from the extra risk they are taking in investing in your company compared to say a more liquid investment such as stock market investments. The downside protection is provided by way of upfront income tax relief on their investment plus a capital gains tax free exit on ultimate sale of the shares (plus there are some other potential tax reliefs). The availability of these tax reliefs are subject to the strict SEIS / EIS tax rules being adhered to by the company for the relevant qualifying period.

You can read more on SEIS / EIS and how it might apply to your company by reading the following posts:

Seed Enterprise Investment Scheme

Enterprise Investment Scheme

In this wide-ranging conversation, Modwenna (Founder of Angel News) discusses her thoughts on crowdfunding, SEIS / EIS plus attracting funding from angel investors. She also gives us a sneak preview of a new online platform that might benefit entrepreneurs and founders who are seeking funding via crowdfunding platforms.

We hope you enjoy it!

It would be great if you could leave us a rating on iTunes – this helps more founders and entrepreneurs find this podcast.

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

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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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….

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.

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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This is a thorny subject that comes up time and time again:

How much of the share capital can I or my investors own under SEIS / EIS?

In this seventh episode of the Get Funded! podcast we cover the (dreaded) “substantial interest” test that basically says that you can’t hold more than 30% of the issued share capital and qualify for SEIS / EIS.

I say “dreaded” because it is not just you or your investor that you need to consider but also any “associates” too. “Associates” include spouses plus parents, children, grand-parents etc (basically blood relations up and down). Brothers and sisters are not counted as “associates”.

Many startup companies get tripped up by this rule so watch out for it!

This episode was brought to you by ip tax solutions – specialists in R&D tax credits

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

Getting your share capital right!

Not every type of share is eligible under SEIS / EIS and given the attractive tax benefits offered to investors, this is little surprise. SEIS /EIS investors cannot receive shares that have preferential rights. They must be – what we like to call –

“Full fat, full risk ordinary shares”

We also cover a couple of pointers to watch out for if you are raising money alongside VCs to ensure that the SEIS / EIS investors don’t lose out and how to avoid losing the relief by accident in the future….

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

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