This Saturday, in case you missed it, was “Small Business Saturday”. London Mayor Boris Johnson was busy tweeting about the event on Friday, and the result of his and his staff’s efforts was a really credible engagement by the public; according to the mayor’s office, 48% of UK consumers were aware it was happening, 1.5m Facebook users were engaged, the #smallbizsatuk was trending top 3 on Twitter throughout the day, and over £460m was spent in total on the day. As John Longworth, the director general of the British Chambers of Commerce pointed out in his article in the Guardian, small businesses make up 99% of the 5.2m businesses in the UK, but sometimes they don’t get the credit, or the column inches, they deserve. He drew our attention to some surprising facts:
- High growth firms are often frozen out of access to finance;
- only half of small business applications for finance are approved;
- a recent Business Banking Insight report revealed that small businesses give their bank an average satisfaction score of 62%;
these points made us wonder here at Haggerston Times:
Is the government doing enough for small business?
George Osborne used last week’s Autumn Statement to announce a significant boost to SMEs;
- £500m of new bank lending;
- Extension of the funding for lending scheme;
- Extra £400m to extend Enterprise Capital Funds, govt. backed venture capital investment into small companies.
Other measures announced by the chancellor included:
- Extension of small business rate relief;
- 230% increase in research and development tax credit for SMEs;
- £45m package designed to boost exports;
- No national insurance paid by companies for apprentice workers they take on.
This is genuinely good news for Britain’s small businesses, who are responsible for 42% of the private sector workforce; the chancellor has also announced that a long awaited review into the structure of business rates will be included in the 2016 budget, next April. Commenting on the statement, Iain Moffatt, head of KPMG Enterprise, said:
“What the statement demonstrates is that alongside all the figures that show incentives are working, putting effort and attention into tax relief is the right thing to do”
What are the best tax-efficient ways for a private investor to fund small business?
The government has introduced 3 flagship, tax-efficient schemes to help private investors fund exciting small businesses whilst minimising downside risk and reducing income tax liabilities.
- Enterprise Investment Scheme (EIS); invest in medium to higher risk small business and claim 30% income tax relief, 30% capital gains tax relief upon disposal of assets if held for 3 years+; invest up to £1m p.a.
- Seed Enterprise Investment Scheme (SEIS); help early stage capital raise initial funding and save 50% income tax relief on purchases worth a maximum of £100,000 p.a.
- Venture Capital Trust (VCT); buy shares in a VCT, which is similar to an investment trust, approved by HMRC, and invests in smaller companies. 30% tax break on investments worth up to £200k
All 3 schemes are government initiatives designed to encourage investors to purchase shares of small, high growth companies. The tax advantages mean that even if the Company fails, investors are compensated by being able to offset their income tax, which means even in a worst case scenario losses are capped at 30 pence in the pound. If the Company succeeds, after 3 years investors can exit and will pay no capital gains tax on the profits they make. Choose wisely, and the right spread of assets could represent an inspired investment choice and a great way to protect existing assets against unnecessary taxation.
How can Enterprise Investment Partners help you make the right choices?
EIP have spent a lot of time and energy sourcing some of the best EIS and SEIS qualifying investments for our clients. They have succeeded in teaming up with some of the most experienced fund managers and start-up experts to present several opportunities to achieve a fully diversified, and downside protected, investment portfolio. For more information, visit the investments section of their website, or take a look at some of their highlights, below:
- Stephen Page’s Startup Funding club; a pure SEIS fund offering clients the opportunity to invest into a diversified portfolio of early stage companies, with a focus on tech but also including entertainment, leisure, the building trade and fashion industry. Investments are sourced by an enviable network of small business angels and business mentors;
- Bestport EIS Fund 2; a generalist EIS fund led by a fund manager with an outstanding track record of success. £44m invested into 47 companies over 18 years, with 37 realised at an average IRR of 23% as at September 2014. Healthcare, business support and IT sectors represented in reliable portfolio sourced by experts
- London Storage EIS; the Company is seeking to raise £5m to fund investment into a series of central London storage units within under-utilised car parks. This new asset class has arisen due to soaring demand from the city-living community. Experienced executive management team has already raised £4m of EIS funding this year, £15m over past 3 years. Target return is 2x investment.
EIP believe that tax efficient investing is the best way to protect one’s assets whilst helping to grow British businesses in a responsible and progressive way. For more information on any of their products please call one of the partners, Christian Elmes, 020 7487 8483, Martin Sherwood, 020 7487 8482, or Matt Lenzie, 020 7487 8316, who will be happy to talk to you about any of the investments above as well as EIP’s other projects, which include a members only leisure and entertainment brand, a highly attractive opportunity in the fast recovering shipping industry, and a fine wine investment which can bring exactly the right kind of diversification to your investment portfolio. We look forward to hearing from you, and wish you a productive, and if you are small business, inspired week!