Stamp Duty Land Tax (SDLT) rates have changed again for non-residents buying a home in England...
HMRC has a venture capital scheme designed for knowledge intensive companies. In this article, we’ll explain how to see if you qualify, how it works and how to apply.
If you qualify as a knowledge intensive company, you should be able to raise more money through venture capital than other companies.
It’s possible to do this via a Venture Capital Trust, but today we’re going to talk about how knowledge intensive companies can use the Enterprise Investment Scheme.
Do I Qualify?
The official definition of “knowledge intensive” is pretty complicated, and HMRC has a whole page devoted to the qualifying restrictions. Here are a few of the key points, but remember we always advise you to check out the official guidelines or work with a qualified tax advisor:
- It’s been less than 10 years since your first commercial sale or your annual turnover exceeding £200,000
- You have fewer than 500 full-time employees
- Your work is designed to create intellectual property
- You expect the majority of your business to come from this within 10 years
- 20% of your employees (in roles requiring a Master’s degree or higher) are carrying out research for at least 3 years from the date of the investment
- 10% of your operating cost is spent on research for the last 3 years (or 15% in one of the last 3 years)
How Do I Apply?
We recommend that you start off by approaching HMRC to see if they agree – in principle – with your application. This is called advanced assurance. They will only give their opinion if you need to raise more money than you could get from a normal (non knowledge intensive) scheme.
Then you will need to complete a compliance statement and provide evidence. You can use this link to request the form.
If you qualify, you can raise up to £10m per year and up to £20m over the lifetime of your company. The limits for individual investors are £1m and £2m respectively.
Is It Worth It?
There’s nothing to say you have to use the knowledge intensive EIS scheme. In fact, if you don’t need the extra investment, you can always just go down the usual EIS or venture capital routes.
But it may be that you (or your investors) want to make use of the higher limits. In this case, the scheme could be right for you.
Whatever you decide, make sure to read the HMRC guidelines thoroughly. Or perhaps you’d prefer to work with a tax expert. Key Business Consultants has vast experience as accountants and tax planners, with a particular focus on EIS and SEIS.
If you’d like to arrange a free, no obligation meeting to discuss your options, please get in touch.