For the Leeds Digital Festival 2021, DRIAD has partnered with leading organisations specialised in funding the growth of technology start-ups. See the video at: https://www.youtube.com/watch?v=4OirlwsDvg4
Featuring speakers from:
- DRIAD (innovation grants),
- NorthInvest (Angel Investment),
- Mercia Technology (Venture Capital),
- Garbutt+Elliott (R&D Tax Credit),
- ABL (Loans),
- Ad:venture (Leeds City Region grants & startup support).
8. DRIAD i an in erna ional con l anc
offering inno a i e companie be poke
ppor o bring heir idea o life
We are e per in compe i i e gran f nding
Inno ation Enablers
CO ALIE HASSANAL
INNO A ION CONS L AN
I IEN BADA
MANAGING DI EC O
HIE SAL S- OBBINS
OPE A ION DI EC O
LA INIA MALO
INNO A ION CONS L AN
10. - Non-dilutive public funding
No ec ri no eq i b lo of o er igh
Financing a portion of the costs of a project
Doe no f nd he compan normal ac i i ie
- Amounts ranging from 50k to 2m
#ONWARDS
Innovation R D grants
11. Why are they useful to #grow?
Bridging a marke gap
Too risky
For venture capital
Pre-revenues
And no securities
But beneficial
to society, the
country, taxpayers,
the industry, etc.
12. Why are they useful to #grow?
Financing in angible a e
Salaries
Labour costs
usually 60 total
Subcontracting
30 total
Within limits:
R D internalised,
geographic rules...
13. Why are they useful to #grow?
B ilding on ha o ha e
Cashflow
match-funding
Processes
Timesheets
Risk analysis
Reporting
14. What you need to know about...
he applica ion proce
In writing
Templated or online
portal
(Video) pitch
Often requested
now
2-step process
Often EoS full
application
With a deadline
and (some) notice
15. What you need to know about...
he elec ion proce
External review
3-5 independant
assessors
Scoresheets
Ranked funded
top to bottom until
funds run out.
portfolio
Competitive
Between 2 and 20
succes rates
Topic-specific are
higher
16. What you need to know about...
T pical iming
Drafting
0.5 to 2 months full
time
Time to funds
3 to 9 months
Mostly refunded in
arrears
!!! Cash flow !!!
Project duration
6-24 months
No early start or
early finish
21. A proactive specialist
asset manager using
balance sheet capital
alongside third-party
equity and debt funds
Combing regional presence
with operational insight and
investment expertise to
create a sustainable
competitive advantage
Our strategy is to leverage
that advantage to deliver
a profitable asset
management business
combined with cash exits
22. From origination to exit our numbers stack up
Mercia by numbers
c.£940m
Assets under Management
10
Profitable exits
£314.0m
Total liquidity
c.113
Team members
1
5
In the regions, from the
regions, to the regions.
Wehave eight regional locations across
the UKfromwhere our team canbe
based.
1
2 3
4
5
6
7
8
1 2 3
Newcastle Preston Leeds
4 5 6
Manchester Sheffield Nottingham
7 8
Henley-in-Arden London
Balance sheet
Up to £10m
Venture
£100k–£10m
Supporting businesses looking to scale from our managed
f nd We e no e ic ed in o abili o p o ide
investment throughout your growth journey to give you
optimised returnsand timely realisations.
We e clo ing he f nding gap in he egion demon a ed b
our track record of capital investment into local businesses.
Our investment capital and advice fuel emerging sectors and
support growth.
Experiencedteam
A rare combination ofregionallylocated,
highly experienced investment
executives and operational specialists
allows Mercia to provide tailored
investment solutions and the ability to
work with management teams to deliver
commercial success.
Powerfulpartnerships
An enviable network of NXDs, subject
experts and advisers that we trust, and
importantly, trust us bring an added
dimension to Boards to achieve optimal
growth, our network works cohesively to
offer best practice on how to grow a
business that helps us strengthen our
f resilience.
Capital resource
Mercia has c.£940million in AuM
including c.£176million of net assets and
c.£764million in FuM,ofwhich there is
c.£314million ofunrestricted free cash to
invest over the next two to five years.
Funds-first business model
Our proven hybrid business model
supports businesses with discrete pools
of capital that overlap and interconnect
and are accessible to our portfolio when
they need it and our balance sheet
provides the growth capital.
Private equity
Up to £100m
Venture
£100k–£1m
We provide capital to profitable businesses seeking to
transition. From buyouts to buy-ins, cash-outs to growth
capital, we provide investment that allows regional SMEs to
achieve their potential.
We have a specialism in funding buy-outs and replacement
capital. CBILS accredited, we offer tailored growth solutions to
ambitious SMEs, many of whom come back for further lending.
£54.7m
Unrestricted cash
c.£600m
FuM
c.£54m
Unrestricted cash
c.£110m
Unrestricted cash
23. Complete Connected Capital
Debt
£100k to
£1m
Venture
£50k to
£5m
Private
equity
£1m to
£10m
MF1, Mercia EIS, NPIF Equity,
MEIF, NEVF, Northern VCTs
EV Growth II
NPIF Debt, EV SME Loans, WM
AHSN SME Loans
Dealflow
sources
Pathfinder & seed
0 - 3 yrs
Early stage & development
1 - 7yrs
Growth & scale
3 - 7 yrs
Exit
7 15 yrs
Follow-on
capital
Third-party
funds
Balance sheet
capital
Investment
Tea
personal
networks
19 university
partners
Direct
enquiries
25. Mercia EIS Fund
We are investing from our
privately raised EIS funds
providing regional, technology-
focused SMEs with up to £1m of
investment.
26. Northern Powerhouse Investment
Fund (NPIF) Equity Finance
We manage £85m of NPIF Equity
Finance investing between £100k -
£2m of venture capital funds into
ambitious management teams in
Yorkshire, Humber and the Tees
Valley.
27. Northern VCT Funds
We are investing from a £142m
venture capital trust fund
providing highly ambitious SMEs
based in the UK regions with up to
£5million of venture investment to
fuel growth
28. Growth II Mercia Private Equity
Fund
We are backing profitable
and growth focused SMEs
with up to £10m of
investment
29. Me c a d ec e e
Our portfolio companies are led by
incredibly bright and ambitious
teams
31. LOCATION ESTABLISHED STAGE
Business description
Moodbean (NPIF)
Real-time employee wellness monitoring
Moodbeam provides a HaaS wearable device to monitor the wellness and
positivity of employees within organisations in real-time. Data is aggerated on a
dashboard allowing early action to be taken before performance drops.
The company recorded its first sales in 2019 supplying products for d d a
mental health monitoring. The B2B productivity monitoring market has now
been established and numerous customers recruited. Several key development
partners have been identified to access certain industry sectors.
Hull 2016 Early stage
www.moodbeam.co.uk
32. LOCATION ESTABLISHED STAGE
Business description
Nova Pangaea Technology
Biomass processing to create natural biochemicals & biofuels
Nova Pangaea is cleantech business that has created a revolutionary and
proprietary patented process, REFNOVA®, which converts discarded plant
biomass into natural biochemicals and biofuels.
The company operates from a £200kg/h demo plant in Wilton, Teesside and has
successfully completed paid trials as the first step to license sales with a number
of feedstock owners.
Tees Valley 2014 Early stage
www.novapangaea.com
33. LOCATION ESTABLISHED STAGE
Business description
Soccer Manager (NPIF)
A developer and publisher of football management mobile games
Soccer Manager develops and publishes mobile games where players manage
football teams and compete against each other. It also provides an online
gaming platform and forum.
The company has built a recognisable brand and following amongst the gaming
community and reached [insert up to date statement regarding 2020
downloads].
Preston 2004 Commercial
www.soccermanger.com
34. LOCATION ESTABLISHED STAGE
Business description
Airship (NPIF)
Software solutions for hospitality and retail
Develops and delivers software solutions designed for unique requirements in
hospitality, helping to track, improve and monetise customer loyalty.
CRM solution is fully productised rather than service-based. Launched a
complimentary product, Toggle, which manages pre-sold revenue such as gift
cards, vouchers, and experiences.
Sheffield 2001 Commercial
https://airship.co.uk/
35. LOCATION ESTABLISHED STAGE
Business description
Arquella (NPIF)
Digital nurse call systems for care homes
Provides next-generation care management systems for the residential care
home market, specialising in a cloud-based SaaS care evidencing platform
AIDA and Wi-Fi enabled hardware with enhanced capabilities AURA .
Solution replaces legacy analogue systems with digital systems that
automatically record call frequency and response times to evidence care levels
and requirements.
Sheffield 2018 Early stage
www.arquella.co.uk/
36. LOCATION ESTABLISHED STAGE
Business description
Azzure IT (NPIF)
A provider of bespoke Microsoft Dynamics ERP and CRM solutions
Azzure IT is one of the UK leading providers of Microsoft Dynamics software
solutions for high growth SMEs, large enterprise and professional bodies.
As a high growth business (as recognised by Deloitte), Azzure IT provides custom
integrations which are either on-premise or cloud based. A range of add-on
apps, from credit control to courier delivery, have been developed to enhance
the core functionality of Microsoft Dynamics.
Sheffield 2010 Commercial
www.azzure-it.com/
37. LOCATION ESTABLISHED STAGE
Business description
Hero Wellbeing (NPIF)
Corporate and property wellbeing platform
Hero provides digital health and wellbeing tools to corporates and real estate
operators which supplement employee and resident benefit packages. He
Navigator platform includes resources to maintain physical, mental and financial
wellbeing as well as to track an d d a progress. Analytics are embedded within
the platform to inform corporates of employee usage and ROI.
Hero has an impressive list of clients including the BBC, Deloitte and HSBC amongst
others. In 2020, Hero won the competitive process to become V daf e global
digital wellbeing provider.
Leeds 2017 Commercial
www.herowellbeing.com/
39. • Fully funded programme supported by ERDF
• One-to-one support from business adviser to develop
plans for growth
• Funding for growth up to 50% grant support
with maximum grant of £25,000
• Workshops and events programme
• Universities facilitated peer-to-peer networks
academic expertise
• Sector-specific advice and support
40. To access AD:VENTURE the business must be:
• SME under 3 years old
• Trading primarily with other businesses (B2B)
• Based in the Leeds City Region - Bradford, Calderdale, Craven,
Harrogate, Kirklees, Leeds, Selby, Wakefield and York
• Committed and planning to achieve growth in turnover and creation of
jobs is linked to grant value.
• Trading in an eligible sector (this generally excludes primary agriculture,
banking and financial services, nuclear decommissioning, activities
related to education or social care, and those sectors trading directly
with consumers e.g. retail and hospitality)
41. The Business Growth Grant (0-36m)
Available between £1000 and £25,000 to support
capital growth costs.
2 levels of Grant: Step 1> £5,000 & Step 2> £25,000.
Businesses are required to contribute a minimum of
50% of eligible costs, and will show evidence of match
in advance of accepting offer.
Growth ambition is evidenced with a sound business plan and a
cash-flow forecast that demonstrates the capacity to grow and
create employment.
42. Grants CAN be used to fund:
• Machinery, equipment and tools (excludes warranties and licences)
• Premise relocation, alterations, fit out and refurbishment
• Website development and design
• IT equipment and office furniture
Grants CANNOT be used for:
• Stock or working capital
• Ongoing marketing costs
• Rent, rates or salaries
Job creation:
Guideline figure of 1
x FTE for every
£5,000 of grant
43. When a Grant Officer meets with a business for the first time:
• Creates company record – details about the business (size, turnover,
contact details)
• Discusses application – details about the investment itself
• Procurement proforma – there needs to be three like for like quotes for
each item to be grant aided
• Business plan – this should detail what the business does, the intended
project, SWAT analysis, benefits of investment, projected growth & job
creation
• Accounts – draft acceptable
• Cash flow forecast – for the next 2 3 years
• Sales forecast enables us to see the profit margin
44. Depending on the strength of the application and the quality
of the documents provided, a decision can be made usually
within 4 weeks of the referral being made. The steps:
• All documents submitted and verified
Grant Officer prepares a report with recommendation;
queries addressed with the business
• Pre Panel Meeting – discussion held regarding the
strength of the business case
• Panel Meeting – it is at this point where a decision is
made; if approved a Grant Funding Agreement is issued
45. • Founded in 2016 by John
Langley and Peter Waugh
• Combined 16 years
experience in software
development and games
design. Business supported
by 2 private investors
• Client list includes Nintendo
Switch, Fintech Co, Justo
Software
• New premises move in 2019
AD:VENTURE funded 50% of
office equipment costs to
help the move
We e taken ad antage of
pretty much every resource we
can access through the
programme and it s been great
all the a through Pete
added As e e gone along
e e al a s had a ne
problem to tackle but the e
always been there with the right
ad ice of ho e can sol e it
46. • Founded in 2019 by Matt
Wheeler and Sam Taylor
• Met at Leeds University, and
won some cash and office
space at Nexus in a business
competition
• Secured a number of
contracts, including one with
Medical Aid International
• Needed to purchase high spec
MACS to deliver on the
contract
• Accessed 50% Match funding
for costs.
• Profits up tenfold this year!
Matt said With AD VENTURE
it s all the different aspects that
help The business mentor s
advice, the workshops,
Accelerate and the funding all
ork together I think there s a
correlation there with how
much we grew the year after
e got this support
47. • Founded by Morten Toft Bech a Danish-born Leeds
based entrepreneur. The company supplies vegan foods
under white label brands.
• Uses pea-based protein developed a range of burgers,
patties and meatless meatballs
• Worked with AD:VENTURE grant officers to obtain a
grant for lab equipment and office fit out
• Since then, now employ 100 staff and recently opened
factories in Canada, Israel, and the US
50. Pre - Seed Seed Series A Series B+ Public
Debt:
Bank Overdraft
Start-up loans
Factoring
Alternative finance
Equity:
• Owners, family and friends
• Business Angels
• Crowd Funding
Debt:
Bank overdraft
Loans
Asset Finance
Invoice Discounting
Alternative Finance
Equity:
Profit re-invested
Venture capital
Crowd funding
Debt:
Bank overdraft
Loans
Asset finance
Invoice discounting
Alternative Finance
Bonds
Private placements
Mezzanine Debt
Equity:
Profits re-invested
IPO (Aim and full listing)
Private equity
£100m-
£10m-
£5m-
£2m-
£1m-
£500k-
£100k-
£50k-
£10k-
Concept and
seed stage
Start-ups Early-stage Later-stage Expansion
(0-10 employees - £0- £1m Sales) (10-100 employees - £1m- £25m Sales) (100-500 employees - £25m- £100m Sales)
Scale up – Funding Options
51. So, what is Venture
Debt?
Funding aimed at high growth scale-ups
Usually term loans repayable over 36 to 60 months
Specialist lending aimed at innovative, fast growing
young businesses
Funding available earlier and in larger amounts than
traditional bank lending
Combines traditional features of a loan with
elements of Venture Capital
Limited track record, no positive cash flow or
valuable assets.
So, what is Venture Debt?
52. Uses of Venture Debt
Extending the cash
runway
Supporting M&A
Activity
Providing Working
Capital
Supporting Capital
Expenditure
53. So, what is Venture
Debt?
Ready to consider Venture Debt?
Are you an SME?
Does 50% or more of revenue come from the UK?
Do you have annual revenue reaching £2m+
Is your business model proven – Established Customer
Base, Functioning Product, B2B preferred (but not
essential)
Is the business equity-backed or privately owned?
Is your business is a high growth sector?
Software
FinTech
SaaS
Wifi
HealthTech
EdTech
CleanTech
56. More questions?
Want more of a chat with me?
Alex Beardsley
alex@abl-business.co.uk
07903 769037 | 01274 965356 | LinkedIn |Twitter
ABL is a national commercial finance intermediary
with people to speak to around the UK:
Yorkshire
North West
South West
North East
Scotland
59. F ded b P fe Ada Bea i e a e e f he eadi g g a ge i e e
ga i a i i he N h f E g a d i h e e be N hI e i a f fi i e e
ga i a i a ig ed i h The N he P e h e dedica ed b i di g a ge a d e c ec ed
ech i e a d a c i ac he N h f E g a d
We e he i g e g he a d di e if he f di g a d ech a c i ac he egi b h i g
a ide a ge f e e faci i a i g i e e h gh a ge e a d c ab a i g i h c a e
a e ffe e e a d c achi g N he ech a
ABO NO HIN E
60. HA E DO
COACH MA CH PPO
N E MEN
E EN
We be ie e i g ech ica i a i i c i ica he f e f he N h f E g a d f fi
ec ic e ia We a ee i a h i e a d be ie e acce f di g a d c
c ab a i i a e e ab e
We c ec a ba ed i he N h f E g a d i h c i f a ge i e a d e We
ffe f ee i e eadi e c achi g faci i a e i d c i ecia i a e a d a age he
i e e ce a c a
61. HA E DO
COACH
MA CH
PPO
N E MEN
E EN
We he dea ce f a ge a d e e e e i h he he f b i e
a e e e a h a d e g e i
We he e e a a ge e ea age f di g c i ie a d
i e e e gage e
T begi e he a efi e hei i i e agi g a d i e a ach b
idi g f ee ad ice e e e e b i e a i ch d c e a d g h
a eg
We ide i ie f i e e i h e a he a d i e ac i h
e e e e i a a ie f f a We ga i e a egic e i g e e hich
he b i di g f e e a i hi a d ha i g f e e i e h gh he egi
a c i
62. We e g i e c i f a a g f e e a i a e ab he N h a e
f e a ge f a a ge f bac g d i h a i e e i e e gi g ech gie We ide e e
bei g a i c i e c i e a e e f i e a d e e a i i c ec i i a
a d d a ic b i e e e ge he
I a d agai i e a e ed i h he UK B i i h A ge A cia i a ac e e ie ced fe a e
b i e e e i i e e The e ce age f e i e i e a he a i a a e age
f a ge e a O ai i g hi
O ANGEL
64. EA IN E IE
N hI e i c ea ed i i ac ig ifica i faci i a i g d f f di g h e i i
Thi c a e i h d a d i i f he e i ea
Th gh he ea e c f ded i i ia i e i c ea e acce ibi i f di g f adi i a
e ed f de di e ified e e e de a d de e ed e a i hi i h i f e ia a e
Ta e a a e f e a be
INVESTMENT
APPLICATIONS
ENTREPRENEUR
COACHING
SESSIONS
ANGELS RAISED FOR
NORTHERN
STARTUPS
DEALS COMPLETED
65. A B EGION
22
LEED CI EGION
16
G EA E MANCHE E
20
NO H EA EE ALLE
14
O K NO H O K HI E
EA IDING
30
O HE EGION
C e e & Wa g
C b a
H & H be C Reg
La ca e
L e C Reg
S eff e d C Reg
N e Wa e
66. D I ING DI E I F ND HE NO H
- Co-founded Fund Her North in 2020.
- A collective of over 28 women with combined investment power over
£620m in the North to support women entrepreneurs seeking investment.
- Over £2m raised for early stage female founders
- 852 event attendees
- I new member on average per day.
- High profile advisory board.
- Recent cornerstone partnerships with Natwest and UBS.
Wide scale initiatives with high level funding organisations to address gender
investment gap.
f ndhe n h.c m
67. - Secured an additional £2m from Innovate UK to further encourage Business Angels to
c bring investment to small and medium companies across the North as part of the
c Regional Angel Investment Accelerator programme (RAIA) programme.
- Partnership between NorthInvest, Innovation SuperNetwork, North East BIC and the
ffUKBAA, backed by Innovate UK
- The group initially deployed £1m in funding in 2020 as part of the RAIA pilot
f programme.
EGIONAL ANGEL IN E MEN ACCELE A ION
OG AMME
68. E IMONIAL
We a i h he ee
bjec i e
- Increase awareness of your brand and services in Leeds and beyond
- Engage with early stage start-ups in the digital sector who can use your
technology to grow
- Position your organisation as a key player in a growing support
eco-system for tech innovation in the North of England
How we can help you:
69. OCIAL IM AC ECH FO GOOD
Ref ec g e g ec f g d c a e e N f E g a d, Be a
G ee Ve e a d N I e a e ed c ea e e acce f d g f
ea age b e e e ec . O a e b g ge e e
e e e a d f d g ba e f BGV, a e e f E e ead g ea - age
ec f g d VC . We e c ab a g a e a d e e e
e , b a e a e 30 b e e be ead f e e ,
a e ec ed g a g a a c e e 2021.
A a f a g g d e f e e e d a d b ea
d ba e f e e e e , N I e a d Ada Ve e ed a a
f e de c a d c e Ada Sc g a e, a a e e add e
e ba a ce f f d g de e e e ed ec f de ac e UK. We
a e ed e f ga a a d e e a e.
ADA VENTURES
BETHNAL GREEN VENTURES
70. K9 Nation is a mobile app for dog owners. It is a free online community to
help support and connect dog owners and dog businesses in the U, where
people can connect, make friends and, most importantly, get access to
information to make life with their dogs easier.
The company successfully completed 2 rounds of funding with NorthInvest,
worth £400k, with Investment Director Jordan Dargue joining the board as
a NED.
CA E D K NA ION
£200,000
CA H IN E MEN
£210,000
IN E MEN IN KIND
Non Executive Director
JO DAN DA G E LACED
71. "NorthInvest have always championed K9 Nation and nurtured relationships
between us and interested investors. They understand the business inside and
out and have facilitated those early conversations with investors whose
profiles and backgrounds match the K9 nation offering. If there's ever an
opportunity to raise the profile of K9 Nation I know that NorthInvest will
reach out to us and I know we can rely on them to advocate on behalf of the
business. Our original North Invest angels have also played a pivotal role
acting as NED’s and advising the business to support and help guide the
strategy since the first round which has been key in our success so far"
"Without the support from the team at North Invest and their ability to
introduce us to their network of high network angels the fund raise process
would have been extremely difficult"
Becky Baker, Founder and CEO of K9 Nation
CA E D K NA ION
72. NEXT STEPS
GET IN TOUCH
Helen Oldham
Founding Board Director
helen.oldham@northinvest.co.uk
northinvest.co.uk @NorthInvest @NorthInvestUK
07801195669
73. S aigh a i g, e e
without heart
Research & Development Claims &
SEIS/EIS Investment
21 September 2021
78. R&D Tax Credits a history
• Introd ced in 2000 for SME s and 2002 for large companies
• Supported by every government since
• Historically underclaimed
• £311m of error and fraud in the system
• Still lots of valuable claims to be made
79. R&D Tax Credits Scheme types
There are two R&D schemes, the SME and the RDEC
• SME
• The compan m st ha e less than 500 staff, and either a balance sheet less than 86 million
or t rno er less than 100 million
• Subsidised R&D expenditure will not qualify for the SME scheme
• The company receives an additional 130% tax deduction for qualifying R&D expenditure
• If loss making, the company can surrender their R&D related losses for a 14.5% tax credit
repayment
80. R&D Tax Credits Scheme types
• RDEC (Research and Development Expenditure Credit)
• For companies that do not qualify for the SME scheme
• 13% credit for your R&D expenditure (increased from 12% prior to 1 April 2020)
• It is a taxable credit, so 10.53% actual benefit
81. R&D Tax Credits What costs qualify?
• Staff costs, incl ding salaries, emplo er s NIC and pension contrib tions, as ell
as some reimbursed business expenses
• Subcontractor costs subject to an automatic 65% restriction for unconnected
subcontractors
• Money spent on Externally Provided Workers (EPWs)
• Expenditure on materials and consumables like light, power and heat that are
used up or transformed in the R&D process
• Some types of software costs
82. R&D Tax Credits Interaction with COVID support
The following are notified State aid meaning they prevent a claim for SME
relief if the loan relates specifically to funding R&D activities:
• Coronavirus Business Interruption Loan Scheme
• Coronavirus Large Business Loan Scheme
• Bounce Back Loans
The Coronavirus Job Retention Scheme (CJRS) is not a notified State aid and
so does not affect SME status. However staff costs relating to a period in
which an employee is furloughed will not be qualifying R&D expenditure.
83. R&D What activity qualifies?
An ad ance in science and technolog through the resolution
of scientific or technological uncertaint
84. R&D What qualifies practical examples
• Developing new or improved data architectures that cannot be achieved with readily deducible
solutions, e.g. pushing beyond the boundaries of existing readily available database engines
• Extending software frameworks (e.g. software development kits, or software libraries) beyond
their original design, where knowledge of how to extend these was not available or readily
deducible at the time
• Attempting to partially or fully solve a technological uncertainty that is documented as a known
subject of research by computer scientists (e.g. there are relevant and contemporaneous
research papers on that specific scientific or technological issue)
• Combining standard technologies and software can be R&D if it was difficult to deduce how to
combine them
• Trial and error and failure (on technical grounds) can be good indicators of qualifying R&D
activity
85. R&D What doesn t qualif practical examples
Indicators that typically are not R&D :
• Assembling the technologies / components of a program to an established
pattern or using routine solutions
• Routine copying or adapting
• Problems that can be solved without difficulty
• Minor changes / optimizations / fine tuning if there has not been a genuine
and non-trivial improvement in the underlying technology
• Cosmetic changes
• Maintenance activities or minor fault fixing
86. SME example: Client Cost Benefit
A business is developing a new integrated sales and stock management software system. The
company has no income yet. The whole project has been funded from an investment raise.
Qualifying R&D expenditure
Staff costs £50,000
Unconnected subcontractor £20,000 with qualifying R&D amount £13,000
(65% restriction applies)
Software costs £10,000
Total qualifying R&D expenditure £73,000
Additional 130% R&D tax deduction £94,900
Total Enhanced R&D expenditure £167,900
14.5% R&D tax credit repayment £24,345
87. R&D - Practical points
• Provide as much evidence as possible
• Capitalised R&D costs and s1308 elections
• S bmitted ith the compan s ta ret rn and an accompanying R&D report
• The submission deadline is 2 years from the end of the relevant accounting
period
• Claims typically processed by HMRC within 4 weeks of submission
89. A brief Introduction to SEIS/EIS
Seed Enterprise Investment Scheme and Enterprise Investment Scheme
50% (SEIS) or 30% (EIS) income tax relief on investment.
Current year and previous tax year
Dividends taxable, but shares CGT free after three years.
No preference on dividends allowed.
Defer other capital gains (EIS) 100% and 50% SEIS
Investor Limits £1m(EIS) or £100K (SEIS)
Company limits £5m (EIS) or £150K (SEIS) £10M(KIC)
Onl applies to oung companies SEIS under 2 rs. EIS 7 rs. Can be e tended to 10 ears if ou are a KIC.
Safety valve - income tax relief if goes pear shaped.
90. In estor s Ta Benefit
Invests £10K 3 ears later Shares are orth 50K
Investment Tax Relief Net Cost of
Shares
Non-EIS (£10,000) - (£10,000)
EIS (£10,000) £3,000 (£7,000)
Seed-EIS (£10,000) £5,000 (£5,000)
Profit CGT Income Tax
Relief Kept
Profit
£40,000 (£4,000) - £36,000
£40,000 Exempt £3,000 £43,000
£40,000 Exempt £5,000 £45,000
91. In estor s Ta Benefit
Invests £10K 3 ears later Shares are bombed
Investment Income
Tax Relief
Net Cost of
Shares
Non-EIS (£10,000) - £10,000
EIS (£10,000) £3,000 £7,000
Seed-EIS (£10,000) £5,000 £5,000
Loss Loss Relief Income Tax
Relief Kept
Net Loss
(£10,000) £4,000 - (£6,000)
(£10,000) £2,800 £3,000 (£4,200)
(£10,000) £2,000 £5,000 (£3,000)
NB for SEIS Reinvest Capital Gain of £10,000 on sale of Residential investment property
Can defer Tax of 28% x £10,000=£2,800 x 50%=£1,400
So net loss above will be £1,600 or 16% of original investment.
EIS only provides a deferral relief for CGT
92. EIS and SEIS-The small Print
Qualifying companies:
Unquoted UK companies seeking to make a profit
Cannot be doing restricted trades (not risky enough!) e.g.
• Leasing
• Property development
• Farming
• Legal & accounting
• Licencing income (unless created IP)
• Hotels or Nursing homes
Not under control of another company
Company investment limits: EIS £5m/£12m & SEIS £150K
Company size limits: Gross assets (<£15M/£200K) and
employees (<250/25)
Young companies: EIS 7 yrs & SEIS under 2 yrs
Qualifying shares:
• Full risk new ordinary shares
• No preferential rights on assets
Qualifying investors:
• Cannot already hold non advantaged shares unless held on
incorporation
• Investor (or associate) cannot be connected to the company
via
• Holding >30% of shares
• Being an Employee or Director (CAN be a Director for
SEIS)
93. EIS/SEIS-How does the process work?
Work ith an ad iser to understand the compan s eligibilit for EIS /SEIS the rules are complex
HMRC can give Advance Assurance that company meets EIS/SEIS criteria (Recommended)
Get the investment and send a form to HMRC giving HMRC details about the investment and investor
HMRC send a certificate for the investor to claim tax relief on their tax return
BUT
HMRC advanced assurance does not give assurance investor meets qualifying conditions
And can deny relief if facts do not match the advance assurance application
Watch out for disqualifying events in 3 years after acquisition (company is taken over, shares are sold within 3 years, become
connected to company etc)
