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EIS is a valuable income tax relief available to individuals who invest in shares in certain qualifying companies.
The main features of EIS relief are:
- The relief is 30% of the equity investment
- The relief is used to reduce the income tax due in the year of the investment or the previous year
- There are detailed rules covering:
- Investor eligibility
- The qualifying activities for the company
- The amount of an individual investment
- The amount a company can raise
- If the shares are held for three years no CGT is payable on a future share sale
- There is a mass of detailed conditions which need to be reviewed
SEIS income tax relief is based on the EIS rules.
However, SEIS relief is only available to individuals acquiring shares in small companies which are less than 2 years old.
The main features of SEIS relief are:
- Relief is 50% of the equity investment made
- The qualifying conditions are numerous and largely in line with the EIS rules
- The size of the company and its age are the main differences between SEIS and EIS
A reduced rate of CGT is available to individual sellers disposing of business assets, as defined, where all the prescribed conditions are met.
The main features of BADR are:
- The rate of CGT is 10% rather than 20%
- There is lifetime gain limit of £1 million
- The business asset must have been held for 2 years at the date of disposal and have been a qualifying asset throughout that period
- There are specific rules for individuals holding EMI share options
- There are a host of conditions which need to be met – so care is needed before a BADR claim is made
An EMI scheme is a very valuable tool for SMEs who wish to attract key workers to their business and retain them.
An EMI share option is tax efficient for the employee and flexible for the employer company.
The main features of an EMI scheme are:
- The company must:
- Have fewer than 250 employees and gross assets less than £30 million;
- Be an independent company;
- Carry on a qualifying activity;
- The individual must
- Work full time for the company;
- Have no more than 30% of the share capital or votes;
- The exercise price of the option must be the market value of the share at the date the option is granted;
- The only tax charge for the employees will be when they sell the shares they have acquired. The CGT charge should be at a rate of 10% if the BADR conditions are met;
- No HMRC ‘clearance’ is necessary but the scheme and supporting documentation must comply with key conditions; and
- Planning is important.
For companies undertaking R & D projects there are some very valuable tax reliefs available which can reduce a company’s corporation tax liability or generate refunds from HMRC.
The main features of the R & D tax relief are:
- What is qualifying R & D is strictly defined
- Different rules for large and small/medium sized companies
- Enhanced tax deduction for SMEs of 230% of qualifying R & D expenditure
- There is a payable credit of 14.5% for SMEs surrendering tax losses
- Only certain R & D costs qualify for relief
- There is an ‘above the line’ approach (RDEC) for large companies
- R & D capital expenditure – 100% capital allowances
We can assist with:
- Determining whether an R & D activity will qualify for the reliefs
- Identifying qualifying costs and maximising claims
- Securing payment claims from HMRC
- Dealing with HMRC enquiries
There are various tax reliefs available to companies involved in the creative industry – films, high end TV, theatrical productions and orchestral concerts.
The main features of the reliefs are:
- Enhanced corporation tax deduction for certain production costs; and
- Payable credit from HMRC for surrendered tax losses.