A series of less than straightforward tax reliefs designed to incentivise UK businesses to create and sell technology based products are now available.
There are a number of tax efficient capital investment schemes available to investors in smaller companies.
They can receive exemption from capital gains tax (CGT) and a 50% income tax deduction on investments up to £100,000 under the Seed Enterprise Investment Scheme (SEIS). If invested in R&D, this could lead to a repayment of up to £33,350 to the company and £50,000 to the investor.
Under the EIS scheme, investments can be made into larger businesses and an investor can claim income tax relief of up to £300,000 and receive exemption from CGT.
Fast growing businesses often provide rewards through a combination of share based payments and cash, maximising the value of the rewards while controlling the associated tax and National Insurance costs.
Where employees become entitled to acquire less than 5% equity interest in an employing, or associated company, it may be worth considering Employee Shareholder Shares which may still allow the employee to realise a tax free disposal on the first £100,000 of gain.
Share options can be awarded under the Enterprise Management Incentive Scheme up to £250,000 per employee without a tax charge on either the company or employee. Gains made on exercising such options may be eligible for CGT Entrepreneur's Relief. This could save employees tax on the first £10 million of gains, if the shares have been held for one year, along with certain other conditions.
Businesses creating intellectual property may be able to claim cash tax benefits from HMRC on the following:
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