Business Support

The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies. 

To claim investor EIS tax reliefs, the company which issues the shares has to meet a number of rules regarding the kind of company it is, the amount of money it can raise, how and when that money must be employed for the purposes of the trade, and the nature of its trading activities.

The main qualifying criteria for EIS investee businesses are as follows: 

• The maximum amount of funds that a company can raise through investments qualifying for the EIS is £5M in any 12 months with a maximum of £12m over the company’s lifetime. There are higher limits for ‘knowledge-intensive’ companies. 
• There is a maximum limit on the number of employees that the investee company can have when shares are issued. The company must have less than 250 full-time employees or their part-time equivalents. For groups of companies, the limit applies across the group. There are higher limits for ‘knowledge-intensive’ companies. 
• The company’s gross assets (or the group assets if the company is a parent company) must not exceed £15 million before any shares are issued and not be more than £16 million immediately afterwards. 
• There are also time limits as to when investments can be raised by the company and how and when the money must be spent.  

It is important that businesses looking to raise finance using the EIS scheme ensure that they qualify. Otherwise, their investors will be unable to claim the promised tax reliefs. HMRC offer an ‘advance assurance’ service that can help ensure everything is in order before raising finance.

To be a director, you must be over 16 and not currently disqualified. 

As a director your responsibilities include:

• filing your company’s annual accounts and reports or appoint an accountant to do it for you
• reporting changes in you or your company’s situation including changes of address
• sending a confirmation statement every year to Company’s House
• pay Corporation Tax, VAT, PAYE and National Insurance contributions due on time

Other key duties include:

Company’s constitution
You must follow the written constitution of your company. This is created when you set up your company.

Promote the success of the company
This means considering the impact your company has on others, the environment, any employees and colleagues. It also requires you to act in the interest of creditors if you are insolvent.

Independent judgement
Take advice, but always make decisions for yourself.

Exercise reasonable care, skill and diligence
Use the skills you have in the best way possible.

Avoid conflicts of interest
Do not take advantage of your position as a director to gain unfair advantages or create conflicts in business or other relationships.

Third-party benefits
Generally, you shouldn’t accept benefits from third parties that may cause conflicts of interest.

Interests in a transaction
You must tell other directors if you personally benefit from a company transaction.

Please call if you are uncertain what other duties directors have or any other matters that will help you decide if a corporate structure is the best option for your new business.

The government has announced £4.5 billion in funding for British manufacturing to increase investment in eight sectors across the UK. The funding will be available from 2025 for five years, providing industry with longer term certainty about their investments.

Over £2 billion has been earmarked for the automotive industry and £975 million for aerospace, supporting the manufacturing, supply chain and development of zero emission vehicles, and investment in energy efficient and zero-carbon aircraft equipment. 

Alongside this, the government has committed to £960 million for a Green Industries Growth Accelerator to support clean energy manufacturing, and £520 million for life sciences manufacturing to build resilience for future health emergencies and capitalise on the UK’s world-leading research and development.

With the entire manufacturing sector making up over 43% of all UK exports and employing around 2.6 million people, this funding is targeted at the UK’s strongest, world leading sectors; including where the industry is undergoing fundamental changes to remain at the forefront of the global transition to net zero, like the move to zero emission vehicles in the automotive industry.

The Green Industries Growth Accelerator investment will support the expansion of strong, home-grown, clean energy supply chains across the UK, including carbon capture, utilisation and storage, electricity networks, hydrogen, nuclear and offshore wind. This will enable the UK to seize growth opportunities through the transition to net zero, building on our world-leading decarbonisation record and strong deployment offer.

If you run a business and manage your planning by scribbling notes on the back of an envelope, you might be advised to read the contents of this article.

When the economy is vibrant, effectively when there are an abundance of buyers in your marketplace, cash flow and profitability tend to look after themselves; as long as you are selling your goods or services at a price that covers your overheads and drawings/dividends.

Unfortunately, since Brexit and COVID disruption and the current upward pressure on energy and raw material costs, buyers are more circumspect about purchasing and business profits and cash flow are under pressure.

In which case your business planning cannot, and should not, be restricted to a few notes scribbled on the back of an envelope.

Your current management accounts should show you what your current situation looks like:

• are you making profits;
• are you keeping within your overdraft limits; and
• are you still solvent.

To answer these questions the use of low-cost, cloud based accounts software is the minimum you should be utilising.

A belts and braces approach should include forward planning, what will be your likely profitability, cash flow position and solvency look like in a year’s time?

If you need help maximising the use of software to achieve these basic planning objectives, or if you would like advice on business planning issues, please call. We can help you be prepared to deal with and survive the UK’s present economic challenges.

In a recent article we explained how granting lengthy credit limits to customers was as good as letting them keep your money in their bank account.

In this post we describe the opposite situation, where you are granted longer terms to pay bills from your suppliers.

If you take delivery of goods and services and are granted – say 60 days before you are required to pay for those purchases – then you have the use of the purchases for almost two months before your bank account balances are reduced.

If you can process and resell goods purchased, within the 60 days, and be paid by your customers at point of sale, then your purchase will be fully-funded – from a cash flow point of view – before you are required to pay your supplier.

Obviously, many businesses are unable to sell on a COD basis (like retailers) but taking advantage of generous payment terms from your suppliers can have a positive impact for all concerns from a cash flow perspective.

Effectively, you suppliers are providing you with valuable working capital.

To make the most of this cash flow boost, reduce (when you can) the payment terms you offer your customers and take advantage of any extended payment terms on offer from suppliers.

But beware, if customers want discounts for shortening credit terms or if you lose supplier discounts for longer payment terms, then you will have to crunch the numbers to see how changing credit terms will affect your profitability as well as easing cash flow.

If your business grants a customer time to pay – say 30 days – after the services or goods supplied have been delivered, effectively, your money stays in their bank account for 30 days.

Further, if you have incurred costs regarding a sale, that have to be paid for before your customer settles their bill, you are out of pocket until your account is settled.

Many business owners are driven by sales targets and to meet these targets many are tempted to offer extended payment terms.

There is a well-worn cliché in business that cash is king. Your business only has choices – regarding the sales it makes – once your customers’ money is in your bank account.

The Government has withdrawn draft regulations after consultation with companies raised concerns about imposing additional reporting requirements.

Instead, the Government will pursue options to reduce the burden of red tape to ensure the UK is one of the best places in the world to do business.

Draft regulations published in July would have added certain additional corporate and company reporting requirements to large UK listed and private companies, including an annual resilience statement, distributable profits figure, material fraud statement and triennial audit and assurance policy statement.

This would have incurred additional costs for companies by requiring them to include additional layers of corporate information in their annual reports.

Since July, the Government has completed a call for evidence on existing non-financial reporting requirements, which has identified a strong appetite from businesses and investors for reform, including to simplify and streamline existing reporting.

The Business Secretary has now decided to withdraw these regulations and will be setting out options to reform the wider framework shortly to reduce the burden of red tape on businesses.

The Government remains committed to wider audit and corporate governance reform, including establishing a new Audit, Reporting and Governance Authority to replace the existing Financial Reporting Council. The Government will bring forward legislation to deliver these reforms when Parliamentary time allows.

Once you have secured the attention of a customer that has purchased their initial goods or services from you, you have completed the hard part – converted a prospect into a buying customer – so don’t be afraid to follow up with cross-sales offers.

For example, when you deliver goods to a customer, do you promote other products that you supply or offer a discount for a repeat order?

Many firms adopt this strategy by:

• Inserting a current publicity leaflet or brochure with the goods physically delivered, or by
• Following up orders by email, a “Hope you found our recent delivery useful…”, with a link to your website and other offers.

In this way you build your relationship and increase footfall.

Three factors influence turnover:

• The number of customers.
• The price of your goods or services, and
• Footfall, the number of times a customer buys from you in a trading period.

In most cases, increasing footfall will have the most impact on turnover. Footfall is the number of times you can encourage customers back to buy more from your business.

So, be on the lookout for ways to encourage your customers back. Once you start thinking in this way, you will be surprised by the number of strategies you could apply.

Most business owners will appreciate the difference between one-off sales, and services that are generally described as recurring.

For example, you may sell a laptop (a one-off sale) and then bolt on a support contract (a recurring sale).

The advantage of recurring income streams is that they not only impact your current sales numbers, but they also help you build a platform of future sales for your business.

Also, the cost of “selling” or acquiring recurring sales is generally lower than securing a one-off sale as you are creating sales revenue into future years rather than just improving your sales figures in the current month. 

Most smaller businesses will have spent time chasing customers for payment beyond their agreed payment terms.

These demands take entrepreneurs away from their core tasks of business building and place unnecessary pressures on cashflow.

To assist, government is stepping in with new regulatory powers. The new measures will include:

• Extending the Reporting on Payment Practices and Performance Regulations 2017. Following consultation, Government will take forward legislation to extend payment performance reporting obligations. They will include new metrics for reporting, including a value metric, so businesses and commentators can see the value of invoices, including invoices paid late, and a disputed invoices metric. They will also introduce reporting on retention payments for businesses in the construction sector.
• Providing greater advice to small businesses on negotiating payment terms that better suit them, and on how going digital can help them get paid quicker and manage their cash flow.
• Broadening the powers of the Small Business Commissioner: Introducing broader responsibilities, enabling the Commissioner to undertake investigations and publish reports where necessary on the basis of anonymous information and intelligence. This will require primary legislation, so will be subject to the legislative timetable.

The stronger measures will benefit UK businesses by fostering a stronger payment culture and providing businesses with more predictable and reliable cash flow, allowing businesses to spend and invest with greater certainty.

It will reduce the time spent by businesses chasing payments, freeing up more time for other activities that will help them to grow. Tackling late and long payments provides an opportunity to increase investment and productivity across the economy.

This will improve payment culture in the UK to support smaller businesses, many of whom do not have the resources to accommodate long or late payments from their business customers.