Transcript Document

BARNES ROFFE LLP
LET THE GOVERNMENT
FINANCE YOUR BUSINESS
By
Paul Hughes
And
Shen Yap
BARNES ROFFE LLP
Grant Funding in the UK
By
Paul Hughes
BARNES ROFFE LLP
 English Regions
• Capital Grants for Business Investment (GBI)
• Administered by Regional Development Agencies:
Advantage West Midlands
(AWM)
East Midlands Development Agency
East of England Development Agency
London Development Agency
Northwest Development Agency
One NorthEast
South East England Development Agency
South West Regional Development Agency
Yorkshire Forward
(EMDA)
(EEDA)
(LDA)
(NWDA)
(ONE)
(SEEDA)
(SWRDA)
(YF)
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 GBI - Eligibility Criteria
• It is located in an Assisted Area?
• The project requires grant to make it happen, or without
grant the project would only go ahead on a smaller scale,
or within a longer timeframe.
• It involves capital expenditure.
• It creates new jobs or safeguards existing ones which
would otherwise be at risk.
• A majority of the jobs created or safeguarded require
qualifications of level 2 NVQ (or equivalent) or above.
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GBI - Eligibility Criteria (cont’d)
• It will secure increased productivity.
• The business is viable and can become self sustaining
within a reasonable timeframe.
• It generates regional and national benefits.
• The bulk of the finance for the project will come from
private sources
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 GBI - Who can get grants
• Assisted Areas (Tier 1 & 2)
• In Tier 1 and 2 areas grant is available to any size of
business, subject to meeting the eligibility criteria.
• Non-assisted Areas (Tier 3)
• In Tier 3 Areas GBI is only available to SMEs.
Tier 1 and 2
Tier 3
Large
Medium
Small
10-15%
20-25%
30-35%
n/a
10%
20%
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 GBI - SME Definition
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 GBI - Eligible Expenditure
• The cost of the tangible or intangible assets directly relating
to the investment project; or
• The wage and salary costs of the employees who fill the
jobs created, calculated over a two year period; or
• In some areas, a combination of both.
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 GBI - How much?
• The amount of assistance which may be available ranges
from £10,000 to £1,999,999.
• Applications for grants for £2 million and above are
handled directly the Department for Business, Enterprise
and Regulatory Reform (BERR) in London.
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 GBI - How do you apply?
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Application Forms
Business Plan
Supporting documentation
Accounts
Evidence of funding
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 Grants for research (GRD)
Grants for Research and Development aim to support research or
development work on technologically innovative products or
processes. This is achieved by encouraging businesses to carry out
R&D activity that they might not otherwise undertake and by helping
to lever in other private finance.
Micro Project: Small scale projects lasting up to 12 months in Micro
enterprises (those having less than 10 employees and either less than
€2m sales or less than €2m of asset value). Grants are 45 per cent of
actual project costs and the maximum grant is £20,000.
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 Grants for research (GRD) (Cont’d)
Research Project: To produce new scientific or technical knowledge, projects
lasting 6-18 months in Micro or Small businesses (those having less than 50
employees and either less than €10m sales or less than €10m of asset value). Grants
are 60 per cent of project costs. The minimum grant is £20,000 and the maximum
£100,000.
Development Project: To develop a pre-production product or process prototype,
projects lasting 6-36 months in an SME (those having less than 250 employees and
either less than €50m sales or less than €43m of asset value). Grants are 35 per cent
of project costs, minimum grant is £20,000 and the maximum £250,000.
Exceptional Development Project: As for Development Projects but with
justifiably higher costs and which may be of strategic importance to the UK.
Minimum grant is £250,000 and the maximum £500,000, the intervention rate is
negotiable up to 35 per cent of project costs.
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 A new
approach for farms & rural cases
The Rural Development Programme for England (RDPE) is a
funding scheme for land based businesses (farmers, growers,
foresters, and primary processors), rural tourism organisations and
other small rural businesses.
The programme which runs until 2013, is funded jointly by the EU
through the European Agricultural Fund for Rural Development
(EAFRD) and the UK Government.
The RDPE will be delivered through a number of activities
including Small Capital Grant Schemes, Strategic Investment
Grants and Action Plans.
Delivered through Regional Development Agencies.
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 EU Grants
• Co-financing Grants
• Indirect via UK Agencies
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Funding for SMEs
By
ShenYap
BARNES ROFFE LLP
 Funding for SMEs
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Enterprise Finance Guarantee
Working Capital Scheme
Capital for Enterprise Fund
Enterprise Capital Fund
Regional Loan Transition Fund
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 Enterprise Finance Guarantee (“EFG”)
• New initiative, much wider than Small Firms Loan
Guarantee (“SFLG”)
• Government to guarantee (or underwrite) 75% of loan
• Loans from £1k up to £1m
• Term loan of up to 10 years (repayment of capital and
interest)
• Premium of 2% p.a. payable (25% discount in 2009), on
top of agreed fees and interest rates
• Businesses with turnover up to £25m
• Most sectors eligible, other than e.g. financial services,
insurance, coal, public entities
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 Enterprise Finance Guarantee (“EFG”) (cont’d)
• Suitable for viable businesses able to service debts
• Not enough security to pledge to be able to get loan from
bank
• Convert overdraft into term loan
• Refinancing loan which would otherwise be withdrawn
• Business plan, cash flow projections, financial history,
track record
• Bank certifies that business is viable, and can service its
debts
• Bank’s credit team sanctions loan after due process then
submits proposal to BERR
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 Working Capital Scheme (“WCS”)
• Government to provide £10bn to support bank lending of
£20bn
• Businesses with turnover < £500m
• Banks review their existing and new loan portfolio
• Bank applies to Government/BERR
• Government/BERR secure 50% of portfolio subject to
eligibility and approval
• Premium payable to BERR, based on risk profile
• Premium likely to be passed borrower
• RBS/Natwest agreement 31 March for £1bn
• Scheme intended to increase liquidity
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 Capital for Enterprise Fund (“CFE”)
• £75m equity fund with government and private sector
funding
• Companies convert debt to equity (i.e. sell a stake in your
business)
• Established businesses with annual turnover < £50m
• Administered by Capital for Enterprise Limited (“CfEL”)
• Investments of £250k to £2m
• More expensive e.g. may command 30%-40% compound
return to investors
• Mainly to relieve ‘over-gearing’, to expand or sustain
growth; not a rescue facility for struggling businesses
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 Enterprise Capital Funds (“ECF”)
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Available since 2006
Funding of up to £2m
‘Equity gap’ concept
Funding mainly for business growth and capital purchases
Equity involved, therefore more expensive
Return on investment, profit sharing structures
Managed by CfEL
Contact CfEL or fund managers
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 Regional loan transition fund
• Available to businesses outside Greater London only
• Administered by Regional Development Agencies (RDAs)
• Consult with local Business Link or RDA
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 Planning/Resources
• Talk to your accountants
• Plan ahead – anticipate, plan, act, review
• Review finances, establish working capital and cash
requirements
• Prepare business plan, management information, budgets,
projections/forecasts
• Talk to bank, discuss options
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Defer paying your tax
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 Enterprise Investment Scheme (EIS)
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CGT deferral for investing in your own company
Subscription for shares
Qualifying Companies
Qualifying Trades
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 Enhances capital Allowances (Green Allowances)
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100% First year allowance
Approved product
Energy Technologies
Water Technologies
Cash repayment if company is loss making
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 ECA Tax Credits
• Payable credit for loss making companies resulting from
capital expenditure on plant qualifying for ECA from 1
April 2008
• Credit is 19% of surrenderable loss subject to an upper
limit of the greater of
(a) the total amount of the company’s PAYE and NIC
liabilities for payment periods ending in the chargeable
period
and
(b) £250,000 (approximately £1.3m loss surrendered)
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 Integral Features: Purchases post April 2008
• Even if S198 tax election for third party sales post April
2008 should be extra 5-15% of sale price for integral
features
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Research & Development Tax Credits
SME vs. Large company scheme
SME Scheme
Large Company Scheme
After August 1 2008 175% rate of enhanced deduction
After 1 April 2008 130% rate of enhanced deduction
Payable credit at £24 for every £100 of qualifying expenditure
on R&D
No payable credit
Company can claim for expenditure on R&D it sub-contracts
to other
Company can only claim for expenditure on R&D it carries out itself,
unless it sub-contracts R&D in certain limited circumstances to certain
entities (qualifying body or individual)
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 What are the benefits of making and R&D Claim?
Examples of claims:
For every £100,000 a company spends on qualifying R&D
expenditures:
Incremental amount deductible
(up-lift)
Tax benefit/savings
Or (when company in loss
position) Tax credit
SME low SME
Large Co
High
£75,000 £75,000 £30,000
£15,750
£21,000
£8,400
£24,000
£24,000
N/A
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 What Qualifying Expenditures are Eligible?
SMEs
• Staffing costs for R&D employees
• Materials, water, fuel and power for R&D
• Software directly used in the R&D
• Subcontracting out R&D activities or paying an external
staff provider for R&D
Unconnected 65%
Connected – cost to connected company
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 What Qualifying Expenditures are Eligible?
Large
• Same as SMEs except generally contractors are not eligible
• Can claim for contributions to independent research
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 Extended Loss Carry Back
• Accounting periods ending during period from 24
November 2008 to 23 November 2009
• £50,000 of loss can be carried back 2/3 years
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The End