If your business is performing well and making a healthy profit, you may be looking at funding options to grow and develop your business. It’s also important to ensure that you are making the most of the available tax reliefs and incentives.
Here we consider some key financial pointers that could help you to take your business forward.
Considering sources of finance
It is best to consider a number of different finance sources, as this will allow you greater flexibility in the long term. These might range from using retained profits in the business, to external sources such as overdrafts, loans, mortgages, share issues (for a company), assistance from government-backed schemes and from regional authorities, and venture capital.
Lenders usually require some form of security, such as a fixed or floating charge over your business assets. You should be careful of risking your personal assets, such as your home, if the lender requests personal guarantees.
When seeking funding for your business, it is important to consider carefully the most appropriate funding source, and to present a well-prepared proposal to your potential lender. We can help you create a detailed business growth plan, tailored to a carefully selected lending source, to ensure you have a greater chance of being approved.
Available tax reliefs
The Office of Tax Simplification (OTS) recently revealed that many small businesses are not aware of the tax reliefs and incentives that are available to them, due to the complexities of the system.
Here we outline some of the key options that may be available to your business:
- Incorporation Relief can be used if you decide to transfer your unincorporated business into a company in exchange for shares for the business owner, without incurring capital gains tax (CGT) at the time.
- The Seed Enterprise Investment Scheme helps companies to raise money when they first start trading by offering tax relief for investors who subscribe to new shares in the company.
- The Enterprise Investment Scheme helps companies to raise money when they are looking to grow, by offering tax relief to the subscribers of new shares. Companies can receive up to £5 million each year, up to a maximum of £12 million in the lifetime of the company (£20 million for knowledge-intensive companies).
- Venture Capital Trusts (VCTs) are large investment groups that are listed on the London Stock Exchange, and have qualifying trading companies that they invest in. Investors subscribe for shares in a VCT, which then provides financial help to develop.
- Employee Ownership Trusts can be used to raise finance from employees by encouraging them to buy shares in the company.
- Gift relief on business assets such as shares in the business ensures that gains can be held over until the individual receiving the gift disposes of it.
- Business Property Relief and Agricultural Property Relief can give you up to 100% inheritance tax relief on business or agricultural assets if you pass them on to your successor in your lifetime.
- Entrepreneurs’ Relief and Investors’ Relief provide a 10% CGT relief on the sale of qualifying business assets or shares in a qualifying business, up to a lifetime limit of £10 million (for each relief).
- Enterprise Management Incentives can benefit companies and employees where the company’s assets are £30 million or less, and companies are looking to grant options over shares to employees.
We can help you to identify the costs and tax implications of different sources of funding, while ensuring that you are claiming all of the tax allowances and reliefs that are available to you. For more information, please get in touch.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.