Tax Planning Issues Tax Incentives for Investors Tax Breaks for Employee Shareholders Research & Development Tax Credits Write Down Allowances
Tax Incentives For Investors EIS -£500,000 per individual per year gaining 20% tax relief on moneys invested and gains on any subsequent sale of the shares being tax free if they are held for three years. Any one company is able to raise up to a maximum of £2m subject to their gross assets being no more than £8m after fund raising. Individuals can rollover any capital gains that they may have into the shares giving them a tax deferral
Tax Breaks For Employee Shareholders Share option schemes are widely used. These can be Inland Revenue approved schemes which have slightly tighter rules or they can be unapproved schemes which are much more flexible, although with lesser tax benefits. There is a place for both of these.
EMI options have three main tax advantages. There is no tax bill until the shares are finally sold (unless options are granted at below market value, in which case the discount is taxed at the time the options are exercised). They are taxed as capital so subject to tax at maximum rate of 28% There is no NIC bill on the exercise of options. Under certain other types of option scheme there is a potential employers' NIC bill on the value on exercise, currently at 12.8%.
Research & Development Tax Credits The existing 100 per cent relief for current spending on R&D to 175 per cent; Companies not yet in profit will be able to take the relief up front and reduce their cash cost of doing R&D by 24 per cent through a repayment of PAYE/NI Tax credits are available for R&D carried out in and outside of the UK
Write Down Allowances Capitalised Research and development expenditure may get 4% write down allowance However if Capitalised the expenditure will not qualify for Research and Development Tax Credits
Acquisition of Intellectual Property If you Acquire IP rather than licence or create it this does not change Tax Status of the company
Tax Planning Issues Tax Incentives for Investors – No Change Tax Breaks for Employee Shareholders -No change Research & Development Tax Credits – Available for additional work excluding cost to acquire IP Write Down Allowances – Can be higher
Licence of Intellectual Property If more than 80% of your revenues are to be derived from licensed rather than created or owned IP then this will effect the Tax status of the company
Tax Planning Issues Tax Incentives for Investors - NONE Tax Breaks for Employee Shareholders NO EMI Research & Development Tax Credits Write Down Allowances – Some limitations but Not owning IP no longer bar to claims
French Duncan LLP We are experienced advisors to University Spins outs and other Early Stage Companies We can offer outsourced accounting record keeping and payroll We can offer tax consultancy services to structure Intellectual Property Based businesses