Venture Capital Schemes: Ways of Raising Finance for Your Business

Enterprise Investment Scheme (EIS)

What are they?

EIS was created to encourage investors to buy new shares from small unquoted trading companies that of high risk so that they could raise finance by giving investors a wide range of tax relief benefits when they invest. It is essential that for this scheme to profitable for the investor in order to provide finance the company they need to inquire into the rules the company have to observe, not only during the period of investment but also three years after.

This scheme has two focuses or parts:

1) Investor focus: The investor should ensure that the shares are issued to them upon payment in cash and registration of the payment or else this could led to them not being able to claim relief. This can occur when a new company takes a long time to create a bank account and payment for shares is not recorded until this as occurred. This happens when shares of a new company is being issued out as part of the registration process at Companies House. Investors and companies are advised to make sure that shares that are proposed, will not be issued during the period of registration in order to claim EIS relief.

Investors have to ensure that their shares are ordinary shares that have a lot of risk attached to it, and should not be redeemable or carry any special rights to the firm or company's assets in the event of the firms dissolution. Shares should only carry limited special rights to the companies dividends.
Shares should not include rights such as the rights involving or attached to the scope for the sum of dividends to be founded on a decision made by the company, the shareholder or anybody with a position of authority. Shares should not include rights where the right for individuals to receive dividends is 'cumulative', this is where a dividend which is due is not paid, the company is obligated to pay later on, when money has become available.

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2) Competition focus: Investors that use EIS have to be able to claim tax reliefs in relation to their shares if they cannot, the company that issues these shares has to fall under certain regulations like;   the kind of company it is, their trading activities, the sum of money they can raise and the processes involved that money can be used for purposes of trade. HMRC has to be satisfied that the company meets all the requirements which will therefore allow the company to be qualified.

The is a kind on company that is allowed to raise money through the the EIS scheme. companies that want to use this scheme have to unquoted company (this means a company whose share cannot be bought and sold on the stock exchange), however it can later become a quoted company without the investors losing their tax relief advantages. This can only occur when there has been no previous agreement for the company's quoted status to change when the shares are issued.
Under the EIS rules companies listed on the PLUS Markets and Alternative Investment Market can raise finance through EIS as long as they meet the requirements, this is due to these changes not being reconsigned stock exchanges. PLUS listed market shares listed at the time of issue will not
recognised under EIS this is due to PLUS listed being recognised as a stock exchange under EIS.

There are certain rules for companies when it comes to qualifying. The company:

• cannot have assets exceeding £15 million
• must no more than 250 full time employees at the point when shares are being issued
• should not be operating or trading in certain industries 
• should not will be listed on a stock exchange or have any intention of being listed on stock exchange during the period of investment 

What are the different types of schemes are available?

1. EIS portfolios: this is typically a managed service that will invest in multiple underlying single EIS investments usually up to 20 companies. A benefit of using this scheme is that it will be managed by professionals, on a normal discretionary basis and the EIS relief  is available once the investors have placed their investment in every individual company. Note to investors EIS relief will not be available if the money as only been placed in the portfolio service.
2. Approved EIS funds: this fund usually has four or more companies attached to the portfolio.  HMRC has to give the fund clearance or a go ahead before the fund is established. It is of no consequence to underlying investments, however, this suggests that the income tax relief is available in the year the fund ends. Capital gains tax deferment is not given until the manager has placed the underlying investments. This fund or scheme has an obligation to invest 90% of the money raised within the year the fund ends. 
3. Single company EIS: This is typically the scheme that carries the maximum amount of risk for the investor because they are investing in one company. So therefore this will suggest that the investors dividends or returns are tied to that on company's performance. Unfortunately, these companies are typically unlisted so there will be no exit strategy until he company is sold or floated. 

HMRC Approved Investment in EIS, SEIS & VCT

Tax Benefits (tax relief and how it be claimed)

The firm is not entitled to income tax relief on the cost or price of shares if they are attached to the company. Company's can be connected or attached in 2 ways; connection by employment and
connection by financial interest.

Investors cannot claim tax relief until the company sends them a form called EIS3. If the investor uses an approved enterprise investment scheme fund they will get a EIS5 form. Investors can make claims up to 5 years after the first 31 January following the 12 month tax year when the investment was placed.

How to apply for EIS?

Business need to use the EIS/SEIS Advance Assurance Application form to apply for EIS. it is advised that companies use this form before looking at share issue, so that they can check or make sure that they meet all of the conditions necessary to qualify for EIS.

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Seed Enterprise Investment Scheme (SEIS)

What are they?

SEIS was created to help small company start ups in the beginning stages of trading to raise finance by giving or providing tax reliefs to individuals investors who buy new equity shares in thses companies. It differs to EIS which provides tax relief to investors that buy shares in high risk small companies.


Tax Benefits?(tax relief and how it be claimed)

Investment requirements in relation to SEIS income tax relief. An investor in SEIS is know as a qualifying investor in respect to the 'relevant shares' if the following requirements are met and also fro investors with UK tax liability which can be used as a basis for setting relief.
The investor should not any:

• employee that are investors
• substantial interest in the company they are going to invest in 
• related investment deals or arrangements 
•  loans that are linked 
• tax avoidance issues 

Investors are not required to UK residents. Relief for investors is available at at 50% of the price of purchasing the shares, on maximum yearly investment of £100,000. Relief is given through a reduction in tax liability, provided that there is a enough tax liability to set it. Investors can make claims up to 5 years after the first 31 January following the 12 month tax year when the investment was placed.

Shares have to held by the investor for 3 years, from the day it was issued in order to be able to claim relief. Relief will be withdrawn or deceased if during that 3 year period the investor is discovered to have stopped meeting up with their requirements or if the shares are sold with that 3 year period.

How to apply for SEIS?

Business need to use the EIS/SEIS Advance Assurance Application form to apply for SEIS. It is advised that companies use this form before looking at share issue, so that they can check or make sure that they meet all of the conditions necessary or requirements to qualify for SEIS.

Formal approval from the company after the shares have been issued. The company must fill out a SEIS1 form and it must be sent to SCEC, before the investor can being claiming tax relief.

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Venture Capital Trust (VCT)

What are they?

A VTC is approved by HMRC as a company that is similar to an investment trust which subscribes for shares in and lends funds to small unlisted companies. Using this scheme greatly benefits its investors though specific tax reliefs.

VTC scheme was created to encourage investors to invest in small unlisted companies. Investors can finance these small companies by holding shares in a venture capital trust. The VTC goes on to use those funds to invest in small unlisted companies, allowing investors have a diversified portfolio thereby spreading risk though holding ordinary shares.

What are the different types of schemes are available?

1. Generalist  VCT's: this type of trusts invest in a lot of different industries and points in development. 
2. Specialist VCT's: this type of trusts invest in a specific industry such as cosmetics.
3. Limited  VCT's: this type of trusts have a time limit to invest such as a 5 year plan on when to withdraw investment and stop VCT at the end on their planned period.    

Tax Benefits or advantages 

1.  Venture Capital Trust is completely exempt from corporation tax when it comes to chargeable gains and also losses on chargeable purposes are not permissible losses. 
2. Capital gains tax (CGT) is exempt for individual investors upon the disposal or sale of ordinary shares within the 'accepted maximum' of £200,000.
3. 'Front end' income relief on taxes is available and can be claimed by individual investors on subscriptions up to the limit of £200,000.
4.  Income tax on dividends is available and can be claimed by individual investors in dealing with ordinary shares bought within the 'permitted or accepted maximum' of £200,000.

How to apply for them?
Investors can apply for this scheme through a venture capital trust (VCT) which are similar to investment trusts, with both being managed by fund managers. So investors can subscribe for shares in a VCT which will then lead to them investing in trading companies that qualify and meet the schemes criteria.

Published on: 09/02/2017

Disclaimer: The information provided in this blog is brought to you by Taj Accountants. As you are reading this blog of your own free will, any information taken from this blog is at your risk. Before using the information provided to apply, to your business seek professional or legal advice. Taj accountants will not be liable for any damages. 

Business Accounting – The Enterprising Necessity

Accounting has been an age old activity in the field of business and enterprising. Companies used to develop and maintain the record pertaining to their financial transactions for the purpose of ascertaining the state of their fiscal health. Finance has been regarded as the most important element in the enterprising activities and any mismanagement of the same has direct and adverse implications for the enterprise. For the same reason the trend to maintain clean and transparent financial records assumed significance for the companies.

Accountants – The Specialized Service Providers

Over the time a trained body of professionals grew with the tag of ‘accountants’ to work in a specialized manner for ascertaining fiscal health status of the companies. Accredited accounting firms got established which provided accounting service on demand. As for individual accredited accountants London has a distinguished place on the global level and they render quality financial service on the basis of recognized international norms and practices. Specialized accounting tasks are now provided to aid and assist the firms in taking up prospective planning and diversifications.

The state of financial health as represented in the accounting statements helps the company to leverage its position in an advantageous manner and seek credits from the lenders. Such information is also necessary from the point of view of government as on such statements the taxation slabs are determined for the enterprises. For having the services of multinational, transnational as also international accountants London, Singapore, Mumbai, Dubai and some other global cities have emerged as renowned service points. This has occurred because of the concentration of companies from distinct nations in these cosmopolitan global megalopolises and the necessity of maintaining accounts by them. Business accounting has therefore emerged multi-dimensionally significant for the enterprises.

Disclaimer: The information provided in this blog is brought to you by Taj Accountants. As you are reading this blog of your own free will, any information taken from this blog is at your risk. Before using the information provided to apply, to your business seek professional or legal advice. Taj accountants will not be liable for any damages. 

Accounting – Serving Multiple Aims for the Global Enterprises

Accounting has been a necessary adjunct of businesses around the world. It has stood as the reliable face of the past conduct of the enterprise and speaks of the company in objective and standard terms. This has made the task of accounting a much sought after one not only by the enterprise but also by the other stakeholders–both private and public. The reliability of the statement presented by the professionals is due to the development and enforcement of the global accounting standards such as GAAP – or ‘Generally accepted accounting principles’ and the potential IFRS (International financial reporting standards). For accountants east London region has taken unique lead in delivering accounting service as according to the differentiated national standards and rules.

Accounts – An Objective Financial Report

Accounting practices assumed global importance in the view of ‘globalisation’ phenomenon that spread in the yester decades. The resultant opening up of the national and regional economies also opened up the avenues of transnational credit leveraging from the international lender agencies. The standard accounts of the enterprise helped it to gain credit and plan expansions. Thus accounts played a facilitating role in capacity enhancements of the enterprises of potential. With the growth of market and investor scene in most of the economies the companies felt the need to present their report card and prospective performance potentials to the general public and for that purpose the objective accounts statements served in a desired manner. As for training of international accountants east London firm of repute held seminars and workshops in various cites of the world during the last year. This has led to the percolation of the best practices in the field of accounting.


Disclaimer: The information provided in this blog is brought to you by Taj Accountants. As you are reading this blog of your own free will, any information taken from this blog is at your risk.  Before using the information provided to apply, to your business seek professional or legal advice. Taj accountants will not be liable for any damages. 

Business Accounting – Emerging Orientations and Specializations

Business accounting refers to the objective task of stating the conduct of business entities especially in the financial sphere. It is performed by the well trained professionals who work in accordance with the established set of national and international rules, norms and practices. Although an ancient business adjunct the task of accounting has grown into a well organized profession with remarkable intricacies and depth. With the newer standards and growth of specialization in this field, dedicated offshoots have emerged catering to the specific needs of variety of enterprises. As for small business accountants London firms have developed uniquely differentiated tools of measuring the financial objectivities of the micro and medium enterprises. Thus in the locus of accounting, variously specialized niche spaces have been carved out that are rendering desired services to the companies as according to the differentiated national standards.

Innovative Tools in Accounting!

The adoption of novel accounting tools in the recent years has produced remarkable advantages for accounted firms. Now more resourceful information can be inferenced from the statement of accounts as regards the working and financial health of the company. Such thorough and resourceful integrated accounting practice has helped the companies to avail the monetary, taxation and tariff benefits when operating across the borders. No doubt such applications facilitate business maneuverings for the nascent and micro enterprises especially in the event of globalised financial regime. For the provision of small business accountants London firms have assumed multinational character and are successfully catering to the needs of the enterprises in different countries according to respective set of regulations although with the latest innovative tools capable of depicting deviations, correlations and trends.


Disclaimer: The information provided in this blog is brought to you by Taj Accountants. As you are reading this blog of your own free will, any information taken from this blog is at your risk.  Before using the information provided to apply, to your business seek professional or legal advice. Taj accountants will not be liable for any damages. 

Accounting Significance for Smaller Businesses Prospects

Although governments in different countries have enforced accounting and auditing for the enterprises but such compliance is generally mandated for the companies beyond a particular ceiling. In other words smaller enterprises have a general excuse for such a practice. While relaxations in the taxation system may be useful for the smaller enterprises the need to have accounts prepared remains all the more significant for them too! In the era of going public for capacity and capital expansion the small businesses don’t want to miss the train. Consequently the practice of accounting has assumed importance in the small business segment too and the role and demand of small business accountants has shown up trends.

Clean Accounts Practice and Credit Garnering

Credit leveraging is practiced by the low volume enterprises on the basis of the performance reports that are released by them from time to time. However objectivity of the accounts statement speaks in the most desired manners for projecting the real picture of the enterprise. Small companies always try to convince resource agencies – banks and public lending institutions especially to gain access to cheaper credits for effecting expansions. Accounts helps and guide the lending agencies to judge the prospects of the any credit proposal from the smaller enterprises.

For the same reason the practice to engage small business accountants by the micro enterprises has grown. This tendency is more potent in the developing economies like India, Brazil and others because here the government encourages the micro and medium enterprises to avail credits from the public lenders. The role of accounts is therefore of a facilitator for any enterprise in general and for smaller ones in particular!


Disclaimer: The information provided in this blog is brought to you by Taj Accountants. As you are reading this blog of your own free will, any information taken from this blog is at your risk.  Before using the information provided to apply, to your business seek professional or legal advice. Taj accountants will not be liable for any damages.