Entrepreneurs are turning away from unhelpful banks to look for other ways to fund their businesses – with the seed enterprise investment scheme and crowdfunding standing out as clear favourites.
But these are only two of many grants, tax reliefs and other funding initiatives available for small businesses at various stages of development.
Wherever a business is in the lifecycle, one or more of these funding opportunities can provide much needed cash.
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) provide income and capital gains tax breaks for investors, while crowdfunding can offer a much-needed capital input.
However, entrepreneurs must not overlook other sources of finance:
Entrepreneur Relief
This is a capital gains tax relief on the sale of shares or business property that can ratchet down tax from the maximum 28% to just 10%.
As an exit route, entrepreneur relief can offer a tax effective way to dispose of a business – providing the tight restrictions on claiming the relief are followed.
Holdover and rollover reliefs
Yet another way to delay paying capital gains tax on the disposal of business assets. Although they sound similar, holdover passes CGT on to someone gifted assets, while rollover relief delays payment if the proceeds are reinvested.
However, entrepreneurs and investors cannot claim rollover and SEIS reliefs at the same time
Research and Development relief
Research and Development relief (RDR) covers a myriad of business activities and not just science experiments in a lab. Depending on the activity, the relief is set off against tax due and can significantly reduce tax bills.
Capital allowances
100% Capital Allowances
Often overlooked, the annual investment allowance is available to all businesses, not just companies, and can defray spending on capital and equipment by up to £250,000 in every tax year.
Time spending around the year-end and a business can set off a £500,000 against profits.
Capital allowances are a key tax reducer for businesses and cover anything and everything from a computer, a car to factory machinery.
Extra allowances may be available if the business is based in an Enterprise Zone.
Other reliefs and allowances
The UK government has a raft of other business reliefs on offer – covering business property, patents, share schemes, corporate losses and holding company exemptions.
Chancellor George Osborne has introduced and revamped many of these tax reducers for entrepreneurs, so before looking to the bank for debt funding, check out whether your business qualifies.
