Small business is the backbone of the economy. That’s not a cliché, it’s a fact. There were 4.8 million businesses in the UK in 2012. More than 99% of them employed fewer than 250 people, and 96% fewer than 10. Not only are a lot of people employed and earning a living in small undertakings, but even during a recession there are enterprising people making a go of small to medium scale trade. That’s reassuring for new start-ups based on a product, service, skill or technique that has a feasible market but not necessarily a lot of immediately available capital.
If you’ve recently set out in a new venture, or are thinking of taking the plunge, there are various government endorsed public schemes aimed at helping people just like you. The Enterprise Investment Scheme (EIS) aims at helping firms raise funding by allowing tax reliefs for investors buying new shares in the company. This can include Capital Gains Tax exemption, share loss relief and Income Tax relief. All this is conditional on investors adhering to particular rules regarding their shareholding – how much they own, for how long, on what terms etc. The Seed Enterprise Investment Scheme (SEIS) compliments EIS by offering relief at a higher rate. There is also the option of a Venture Capital Trust (VCT), which is a company approved by HMRC to lend to or subscribe for shares in small unquoted companies. These also enjoy conditional tax relief benefits.
Such schemes are intended to help you, but there isn’t a direct, straightforward registration process. Acceptance is not automatic either. Instead, you can request advance assurance that you’ll qualify. This is done by submitting a proposal to HMRC, who respond with guidelines as to whether you’re application is likely to succeed. Professional advice regarding your company formation, its administration and the rights and responsibilities of its shareholders will all help give a clearer picture of your business structure. Even if you don’t get enrolled on an HMRC programme like those above you’ll want that kind of clarity anyway, not only for potential lenders or investors, but also your own peace of mind.