government support available. This includes the latest iteration of the Recovery Loan Scheme, which no longer has a Covid-19 impact test; and the newly expanded Start Up Loan, and Second Loan Scheme. Businesses which have not considered these before may wish to do so now. Traction from the tax rules Three government schemes exist to help relatively new companies expand, by providing external investors with generous tax relief. These are the Enterprise investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trust (VCT) Scheme. Criteria apply to the company, investor and proposed investment. Recently announced changes give these schemes continued prominence. SEIS criteria thus become more generous from 6 April 2023, whilst the EIS and VCT schemes, originally due to end by 6 April 2025, are extended. Tip six: take cash seriously If the business is persistently short of cash, investigate. What is behind the financial stress? In a company context, if there is a likelihood that the business can’t meet short term financial liabilities, there can be a risk of directors becoming personally liable to repay debt. Special care is then needed in respect of director loan accounts: the usual tactic of clearing the loan account with the payment of a dividend may not be possible if the company is under significant financial strain. Red light: repeated shortfall in cash flow may suggest serious underlying problems. Professional advice is recommended where there are any question marks over basic business viability. Working with you Navigating current market conditions is likely to require a mixture of business acumen and tax insight. We are always on hand to advise in any of these areas. Please don’t hesitate to get in touch.
Particularly topical, because of imminent change to the rules, is setting up a company share option plan (CSOP) to incentivise key employees. CSOPs are tax-advantaged schemes allowing eligible companies to grant share options to selected employees or full-time directors: strict criteria apply, but where rules are correctly navigated, the recipient has no income tax or National Insurance liability when the options are exercised, with the capital gains tax regime applying to gains on disposal, instead. The company stands to benefit as well, with a corporation tax deduction when the options are exercised, provided conditions are met. Other tax-advantaged schemes designed to encourage employees to hold shares in their employer, such as Enterprise Management Incentive (EMI) share options, may also be worth consideration. Energy and sustainability In many offices, heat, light and air conditioning account for 55% of the average energy bill, and kettles and water coolers another 10%. Cutting waste and looking at energy efficient alternatives are new areas to prioritise when managing cash. With the push towards a low carbon future, businesses may want to check whether this is the moment to invest in energy saving technology, such as low carbon heating and energy saving LED lighting. Various sources of support, advice and in some cases, loan or grant funding, exist here, some specifically aimed at small and medium-sized enterprises. A change of direction now could cut costs in the longer term. Tip five: consider sources of funding In current circumstances, many businesses may need to look for additional finance. Traditional channels include bank loans and overdrafts, recourse to savings and friends, and issue of shares, with newer alternative sources of finance ranging from angel finance to crowdfunding and peer-to-peer lending. There is a range of
February 2023 Disclaimer - for information of users: This Briefing is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this Briefing can be accepted by the authors or the firm.
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