Tag Archives: business planning

Research and Development (R&D) Relief

Your company can claim R&D Relief if they have an R&D project that seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty, not just an advance in its own state of knowledge or capability.

The project must be related to your company’s trade – either an existing one, or one that you intend to start up based on the results of the R&D.

In order to see whether your company could qualify, please check the following guidelines:

Project – it must be a separately identifiable and commercially viable project.

Advance in science or technology – what scientific or technological advance is being sought? This focuses attention on the project’s aim for an advance.

Science - Scientific uncertainty exists when knowledge of whether something is scientifically possible or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.

Technology - Technological uncertainty exists when knowledge of whether something is technologically feasible, is not readily available or deducible by a competent professional working in the field.

Directly contribute – you’ll need to show that the persons leading the R&D project are themselves competent professionals working in the relevant field.

Scientific or technological uncertainty – Explain why they consider the uncertainties are scientific or technological uncertainties rather than routine uncertainties.

SME Relief

If a company has fewer than 500 employees and either of the following:

  • an annual turnover not exceeding €100 million
  • a balance sheet not exceeding €86 million

It qualifies as an SME for R&D Relief.

This means there are higher rates of relief. From 1 April 2012, the tax relief on allowable R&D costs is 225% – that is, for each £100 of qualifying costs, your company could have the income on which CT is paid reduced by an additional £125 on top of the £100 spent. It also includes a payable credit in some circumstances.

Larger Company Relief

Otherwise the large company’s relief is available on allowable R&D costs at 130% – that is, for each £100 of qualifying costs, your company could have the income on which CT is paid reduced by an additional £30 on top of the £100 spent. If instead there is an allowable trading loss for the period, this can be increased by 30% of the qualifying R&D costs – £30 for each £100 spent.

Seed Enterprise Investment Scheme

In the Finance Act 2012 the government introduced a new tax advantaged venture capital scheme called the Seed Enterprise Investment Scheme (SEIS).

Qualifying investments will attract income tax relief at 50% on the lower of £100,000 and the amount of the qualifying investments made during the tax year for investments made between 6 April 2012 and 6 April 2017.

There are qualifying conditions as follows:

  • The maximum that can be raised under this scheme is £150,000.
  • The investee company must have been incorporated no more than two years before the SEIS shares are issued.
  • The company must have fewer than 25 employees and assets up to £200,000.
  • The company must not have had any investment from a Venture Capital Trust (VCT), or issued any shares in respect of which it has submitted an EIS compliance statement
  • Within 3 years of the date of the relevant share issue, all the monies raised by that issue must be spent for the purposes of a qualifying business activity, carried on either by the issuing company or by a 90% subsidiary. If this condition is not met, investors will lose their tax relief.
  • The payment of dividends to shareholders is not regarded as being for the purposes of a qualifying business activity.
  • There are also provisions for the withdrawal of SEIS relief in certain circumstances, such as where the shares are sold within three years of issue.
  • A qualifying trade is one which is conducted on a commercial basis with a view to the realisation of profit.
  • Most trades qualify, but some do not. A trade does not qualify if it consists wholly, or substantially, of ‘excluded activities’. A separate list of ‘excluded activities’ are available.
  • Shares must be paid up in full, and in cash, when they are issued.
  • Shares must be full-risk ordinary shares, and may not be redeemable or carry preferential rights to the company’s assets in the event of a winding up.


  • You have subscribed for shares which have been issued to you and which at the time of issue were fully paid for. You may subscribe via a nominee.
  • You do not have a ‘substantial interest’ in the company, at any time from date of incorporation of the company to the third anniversary of the date of issue of the shares. ‘Substantial interest’ is defined as owning more than 30 per cent of the company’s issued share capital, or of its voting rights, or of the rights to its assets in a winding up. Shareholdings of associates are taken into account in arriving at the 30 per cent figure. ‘Associates’ include business partners, trustees of any settlement of which the investor is a settlor or beneficiary, and relatives. Relatives for this purpose are spouses and civil partners, parents and grandparents, children and grandchildren.
  • Brothers and sisters are not counted as associates for SEIS purposes.
  • It does not permit employees of the company to claim SEIS relief, but there is a specific exception for directors who are not considered employees and do not receive remuneration.

Small Business Accounting: What does pension Auto Enrollment involve?

By late 2017, in just 3 years time, every employer in the country, even if employing just one person, being themselves, will have to have put in place a contributory pension scheme. The largest employing companies have already been through the process of auto enrollment.

This is a serious attempt at bringing the UK’s retirement planning somewhere akin to countries like Australia and US, ensuring less reliance on the State Pension. There are clear rules regarding differing employee categories, salary definitions, increasing contribution rates and what to do if an employee wants to opt out.

The surprising fact is the opt out rate across the country is as low as 10%, even in low paid jobs. Employers must not be seen to coerce an employee to opt out and the financial penalties for not abiding by the rules are punitive.

So when a year before your staging date, the letter from the Pensions Regulator drops through your letter box, it is time to project manage the large workload heading your way with potentially 50-100 man hours needed. Before then, you may want to read up to prepare yourself on the Regulators website http://www.thepensionsregulator.gov.uk/employers . You can also establish your own staging date if you have your PAYE tax reference number handy. Alternatively, contact a financial adviser to find out more and consider your own company budgeting to ensure a 3-4% of salary employer pension contribution is affordable.

This is something businesses cannot ignore regardless of size. There are a range of solutions including doing it yourself by setting up your own scheme, or using professionals to assist you in the set up.

To make sure you do not miss anything, please get in touch on 01483 222858 or email jeanc@intheblacksolutions.co.uk.

Small Business: Essential Business Planning – Part 4 Cash Flow

Business Planning – Cash Flow

Once you’ve reviewed your sales, resources and costs for the business you will have formulated a budget profit and loss for the business, preferably on a month by month basis. You then need to take account of the payment terms of the sales and the purchases.

Payment terms for sales can vary, it is possible to set your own but with large clients it is not always possible for them to vary their terms from supplier to supplier. It is important to remember that they will often have deadlines for submission of invoices and processes that must be adhered to like purchase order numbers. Also, strange as it might seem an invoice cannot be paid until it has been submitted, so make sure your billing is always the first thing you get done. But even after the invoice has been sent you could still be waiting for some time before the cash is received. Always follow up regularly with statements and reminders but be aware of the time lag as it will affect your ability to pay your own suppliers.

On the purchases side you’ll have different payment terms from staff who maybe paid on a weekly or monthly basis, to rent that maybe quarterly in advance to other suppliers who may extend either 30 or 60 days credit. Don’t forget to include regular payments like PAYE or VAT and corporation tax payments 9 months after your year end. Also, include any capital items like equipment that needs to be purchased or any other costs your likely to incur.

So start with your opening bank balance and outstanding debtors received, then sales as they are paid to terms outlined then deduct costs as and when they fall due and each month this will give you a closing bank balance. You’ll be able to forecast at least a year and see the impact of the changes you’d like to make to your business before making the commitment. But it will also give you the opportunity to get the necessary funding it place to make your plans a reality.


Small Business: Essential Business Planning – Part 3 Costs

Preparing a budget – Costs

Once you’ve been through the process of reviewing and setting your sales budget for the year, it’s time to turn your attention to the cost side of achieving these targets.

Direct costs

These are any costs that are directly incurred as a result of the sales you make and can be directly attributable to a job of a piece of business.

The place to start is your gross margin from previous years, this will give you a good indication of your cost of sales. Don’t just stick with this figure though! Having reviewed your sales you will have set a plan of perhaps selling more or selling something different, extending your opening hours or increasing your prices, this leads on to looking at the costs of sales in a similar way. Can you negotiate a smaller cost increase with your supplier? Negotiate a discount for purchasing more? Are there cheaper alternative suppliers? Are there better, more efficient ways of working?

Once you’ve reviewed these it maybe possible to increase your gross margin and therefore as well as selling more, getting a lower cost will result in a bigger gross margin and more profit.

Fixed costs/overheads

These are all the costs that are incurred regardless of whether any sales are made. If you’ve employed staff or signed a rent agreement for premises these will still be incurred whether or not you have sold anything.

This is one of the key reasons why it is so important to plan for the year ahead, so that you can be prepared for any changes within your business and plan accordingly.

You can use the spending for the previous year as a basis for the costs for the coming year but remember to use it as an opportunity to look at what has been bought in the past and whether or not it was worthwhile. That way you can avoid making expensive mistakes again. Go through all costs line by line as there will undoubtedly be room for improvement.

When reviewing your fixed costs incorporate your resources plan as this will give you key information about buying new equipment or recruiting more staff. It will also cover the type and salary of new staff.

Small Business: Essential Business Planning – Part 2 Resources

Preparing a Budget – Resources

Now that you have set a budget for sales it’s time to ask yourself what resources are needed to achieve your plan. By reviewing the resources you can incorporate any changes into the cost side of the budget before finalising this.

Key questions for resources

Are the premises big enough? If not you may have to negotiate with your current landlord to terminate an existing contract and look for bigger premises. This will all take time and forward planning will ensure you minimise additional expense.

Are there sufficient staff? Looking for additional staff can be expensive, recruitment agencies often charge as a % of the starting salary. With the benefit of time these costs can also be reduced, some firms offer incentives to existing staff to put forward candidates for job vacancies and in many cases this can prove much cheaper and more reliable than the recruitment agency or general advertising. “Good people know good people!”

As well as the cost of recruitment additional staff are often not as productive in the first few months as they require time and training to be best utilised depending on your industry and business practices this can be up to 3 months before they are fully operational. This is particularly relevant to service industries where staff are often fee earners.

Do they have the right skills? Identify the skills needed in the business going forward is essential for setting training budgets. Discounts are offered for multiple attendees or purchasing multiple courses with the same supplier.

Do you need to invest in more equipment? Or even a replacement strategy for the existing equipment? This will possibly require additional funds or a financing agreement that will incur interest and other charges. With prior notice you can achieve better and cheaper financing by virtue of choice and prior planning. Getting quotes in advance and finding out their lending criteria.

All of these questions and more will need to be factored in when setting the budget for the coming year and these will all have an impact on the costs of the business.

Small Business: Essential Business Planning – Part 1 Sales

The process of business planning at least once a year is not a luxury but a necessity for even the smallest business and one that should not be ignored.

It gives the opportunity for insight into how your business is performing and areas for improvement. Many small business owners rely on annual accounts but this is often too late as the information is retrospective, and in many cases as much as nine months behind, as they’ve been completed to fulfil your statutory requirement.

Not only that but it will identify other key areas necessary for the successful growth of your business. Do you have the right resources? Do you have the right staff/skills? Are your premises large enough? Do you have sufficient working capital?

Preparing a Budget – Sales

The first place to start is with the sales figures, and previous performance helps with preparing a budget.

If you’re confident that there is a certain level of business and you’re previously experienced growth of say 5% per annum that this can form the basis, but where possible drill down into the detail:-

  • Month by month basis
  • Customer breakdown
  • Type of sale

If possible, use data from more than one year as this will often show trends that can be incorporated into your forecast.

It will also give you the opportunity to review the products/services you offer, is it possible to sell more? Can you provide more to a particular customer or type? Can you offer something different? What are your main competitors doing? Can you increase prices? Do you regularly review prices? Is there any seasonality to your business?

By reviewing all of the information and setting targets it helps to formulate the plan to help you achieve the goals you have set.

The key is also to measure your performance as you go; so set the budget, put the plans and actions in place to achieve the growth, then each month measure your performance.

This helps highlight areas where action needs to be taken and you’re identified it each month and therefore you have the opportunity to put it right before getting to the end of the year and being disappointed that you didn’t make better use of the information you have in order to achieve your goals.

The 3 P’s for a Successful Business Start-up

When you start up your own business it can be a very exciting time, but it can also be daunting. Many business owners start their new business venture because they have a good idea or a great product and they are passionate about what they do. But very few have all the skills needed for a successful business simply due to experience. A new business dictates that you need to know about all aspects of running a business, from marketing, HR, legal and financial.

So here are my 3 P’s to a Successful Start-up:

1. Your Product (or Service)

You can’t have a great business without a great product, whether it’s goods or services you offer, you need a great product, something that sets you apart in the market place. This doesn’t mean that you have an exclusive offering but something that sets your business apart, meaning a well-defined product (or service) that differentiates itself in some way.

You need something that sets you apart from your competitors and the power to influence people to work with you or buy your product. This could be your approach, the way you physically present or/deliver a product, your after-care service, or how you package and price your product or service. Or a unique combination of these factors.

2. Your Plan

To quote from Benjamin Franklin “If you fail to plan, you are planning to fail!”

When starting your business make sure you have a plan. At least something that puts into writing what you want to achieve and how you intend to go about it, this will help in so many ways not least keeping you on track when times are tough but also informing others of your vision.It will help to get finance from banks and highlight areas where help is needed.

It will also helps you understand what turnover or number of sales you need to cover your costs (pay your mortgage!) or pay your staff/office overheads. It really helps to have that level of granularity – I need to sell X or have Y number of clients spending £Z per month to hit turnover target of and my overheads are ABC, etc.

Lastly, remember the opportunity cost of running your own business, if you were working for someone else, how much could you expect to earn? This question often puts the profit level into perspective.

3. Get Professional Advice

Professional advice is invaluable at the start of any business. This will help prevent costly mistakes made simply because you’re not aware of certain aspects, particularly when it comes to accounting. You can miss out on tax allowances and advantages simply by getting the timing wrong.

For example, one client missed out on the temporary increase in the Annual Investment Allowance (AIA) by buying a large piece of equipment costing over £200,000 by not seeking my accounting advice before the purchase. They bought the equipment in December 2012 when the AIA was £25,000, if they had delayed the purchase slightly they would have been able to claim the whole cost of the equipment against tax as the AIA temporarily increased to £250,000 from January 2013. So instead of a deduction of £200,000 against profits they got a deduction of £56,500, the remaining £143,500 would be carried forward for use against future profits at a rate of 18% per annum.

Starting up in business?

If you are in the process of starting up your new business, it’s a great time to seek professional advice. Get in touch for a no obligation chat about your business plan, cash flow forecasting, and accounting requirements, I’d love to talk to you.