UK scaleups should HMRC-proof their business plans before a slow, hot summer – Nob6
Information of the large tech valuation reductions within the U.S. might need you holding your breath as a startup founder. The change in narrative could recommend a gradual summer season forward, and speculative funding will show unpopular.
That stated, KPMG’s newest venture capital report reveals a wealthy atmosphere for British startups to succeed. Scaleups raised over £6.9 billion between January and March alone. Competitors might be sizzling.
In response to this new atmosphere, founders ought to do every part they’ll to make funding choices simpler for VCs and angels. Within the UK, the HMRC’s Enterprise Funding and Seed Enterprise Funding Schemes (SEIS and EIS) current top-of-the-line methods to do that, as they provide tax-relief advantages to early-stage buyers, which might give them the nudge to make the leap.
That stated, EIS and SEIS functions are not any easy enterprise. In truth, about 23% fail (in some years, it has been about 40%.) As a result of the funding comes from taxpayers’ cash, HMRC could be very cautious about who it permits to make use of the schemes.
There’s no tricking a system solely meant for these categorised as ‘high-risk’ companies. In consequence, you’ll must show your small business is actual, and as many neglect, you’ll additionally must current a technique for achievement.
Your marketing strategy would be the first place HMRC appears to be like for this proof. Right here’s the way to put together it forward of an utility.
Readability is essential
In case your plan includes excessive spending on capital funding, this may cut back the “danger” facet of your small business, which invalidates your utility for the SEIS scheme.
Step one to HMRC-proof your marketing strategy is to current every part with excellent readability. It is best to display an unerring capacity to showcase market gaps and the potential options which may fill them. That is of especial significance within the present market.
As the applying calls for, founders should present “particulars of all buying and selling or different actions to be carried on by the corporate.” There’s no area to tip-toe across the fantastic particulars. HMRC is not going to be fooled. Keep away from jargon, display how your small business gives the answer to an issue in a transparent and calculated means, and present how you propose to generate profits. Use proof.
Probably the most widespread causes we see functions disqualified is “continuation of commerce.” This refers to makes an attempt to bypass SEIS eligibility, which includes a two-year age hole.
One group of Swedish founders we met wished to scale their operation within the UK utilizing SEIS. Their utility failed (regardless of our 99% success price) as a result of HMRC found the corporate had operated for over two years, slightly below a distinct IP tackle. It’s for this actual purpose HMRC calls for such rigorous enterprise plans from its EIS and SEIS candidates.
Sure different actions might additionally exempt you from the schemes — banking, insurance coverage, money-lending, debt-factoring, and hire-purchase financing, to call a number of. Be sure to cowl all bases. Solely clear descriptions of your income streams will guarantee the individuals who assess your utility.