Connect with us

Finance

Enterprise Investment Schemes – four tax reasons that make them great

Published

on

Since 1994, Enterprise Investment Schemes (EIS) have been an important tool in the investors’ kit, but many potential investors worry that EIS-eligible businesses are too high risk. Here, Craig Harman, a tax specialist at Perrys Chartered Accountants, explains everything you need to know about Enterprise Investment Schemes, and the tax savings you might be missing out on if you’re not getting involved.

A government-backed initiative, the Enterprise Investment Scheme was designed to encourage individual investors to buy shares in higher-risk companies by offering generous tax reliefs to those who invest. To be eligible for funding under the EIS, a business must be within seven years of its first commercial sale, not have gross assets worth more than £15 million before shares, and have less than 250 full-time employees. It’s true that investing in less established businesses may carry a greater investment risk. However, there is the potential for higher returns and the tax relief available can minimise any loss should the worst happen.

Craig Harman

Income tax relief

Of all the benefits of investing in an EIS, one of the most attractive is the income tax relief you can receive. You can claim relief for a maximum annual investment of £1 million, or £2 million if you have invested in a knowledge-intensive company. You can claim for up to 30% of your investment, meaning that you could receive up to £300,000 tax relief a year – or £600,000 for investments in knowledge-intensive companies. This is one of the most generous tax relief schemes currently on offer in the UK.

Loss relief

Of course, returns are not guaranteed when investing in early-stage companies, and indeed most investments carry an element of risk. However, the EIS provides attractive loss relief at your marginal tax rate. When you combine this loss relief with the income tax relief you receive when investing in an EIS eligible company, you greatly reduce the amount of capital you have at risk.

They support small/medium businesses 

Since its launch in 1994, the EIS has been pivotal in helping small to medium, new starter companies in the UK achieve vital growth capital. Over the last two decades, the scheme has helped EIS businesses access billions of pounds which might otherwise have been ploughed into lower risk companies. The EIS stipulates that those receiving investment under the scheme must use it to grow their business – increasing revenue, customer base and number of employees. This means that you can be sure that your investment is helping small businesses to thrive, while providing valuable jobs and services to local communities.

Profits are tax free

Another initiative of the EIS are the Capital Gains Tax advantages. For most non EIS investments, any returns will be liable for Capital Gains Tax (CGT) above the CGT-free personal allowance. When you invest in an EIS, provided you meet the conditions, all growth in value is exempt from CGT, meaning you can achieve a greater net profit, while saving your personal allowance for other investments.

The use of the scheme is subject to detailed conditions. Therefore, it is important these are met otherwise your investment may not qualify. If you have any doubts, it is best to seek advice from a specialist EIS accountant.

 

Finance

Taxing times for online marketplaces? Operators must act now to avoid losing sellers

Published

on

By

By Niall Kiernan, Senior Director of Product Marketing, Vertex

 

In today’s digital landscape, online marketplaces are an enabler for many businesses to achieve their growth ambitions. From Amazon to eBay, Etsy to Vinted, businesses of all sizes are now utilising online marketplaces, and recent years has seen exponential growth in this area. Numerous factors, including the proliferation of mobile devices and widespread availability of high-speed internet, have resulted in this escalation. Combined with consumer demand for convenience, along with the impact of the pandemic, the success of online marketplaces can be seen in the numbers. In 2021, retail eCommerce sales amounted to approximately US$ 5.2 trillion worldwide. This figure is forecast to reach US$8.1 trillion dollars by 2026.

It is clear that online marketplaces are a vital source for businesses to continue to flourish but there are still major roadblocks which can hinder a business’ efforts to capitalise on the booming sector. According to research commissioned by Vertex, which surveyed 479 finance professionals globally, seven out of ten sellers using marketplaces to trade online believe that indirect tax challenges could deter them from using them again in the future.

The complexity of ensuring a frictionless eCommerce experience

Whilst over half of respondents in the survey agreed that marketplaces are getting easier to use as a sales channel, ensuring that both operators and sellers can enjoy a frictionless experience is one of the biggest challenges in the space. Respondents indicated that they are looking for more support and guidance on issues including: how to ensure transactions and the transfer of money can be more seamless (65%), tax liabilities (64%), and compliant invoicing (63%). But what are some of the specific roadblocks both marketplace operators and sellers are experiencing?

  1. The cross-border trade conundrum

85% of marketplace operators surveyed indicated that they are looking to increase their seller base, however there are numerous tax complications when trade crosses borders. Four out of seven operators stated they have struggled to manage tax liabilities and tax complexities around seller shipping locations. Online marketplaces are very much a global affair, with cross-border transactions being the norm.

The difficulty here is that both operators and sellers must comply with the different tax regimes of the countries they operate in, which can be a complex and burdensome process. Seller respondents reported a wide range of issues when they sell through marketplaces, including balancing their tax liabilities and knowing where and when they are liable for tax.

  1. Complexities in every step of a transaction

Dig beneath the surface and the process of a transaction is much more complex than initially meets the eye. From listing fees to shipping and handling charges, or the previously mentioned cross-border trade complexities, every step in the transaction process brings multiple challenges to both the operators and sellers themselves.

45% of sellers surveyed want their marketplace operators to improve the process of finance and tax automation to overcome these barriers, but of the operators, only 56% manage all tax liabilities on their seller’s behalf. If marketplace operators want to ensure they have a healthy population of sellers, this figure needs to increase.

Tax technology for a trouble-free tomorrow

Although there are clear and significant indirect tax challenges for online marketplaces, the space remains an attractive channel for businesses to achieve their growth ambitions. 81% of businesses are taking advantage of online marketplaces to attract new customers and sell into more countries and upon further inspection, they attribute this expansion into marketplaces to reach a wider geographical market (57%), to being more competitive (50%) and to tap into cross-border sales opportunities (48%). It’s clear that sellers are wanting to utilise online marketplaces to expand their customer base globally and if operators want to increase their seller base and take advantage of the growing demand for this, and 85% of those surveyed do, then they need to ensure that their platforms offer a seamless experience for their sellers.

By investing in an end to end tax management solution which can handle all types of indirect tax requirements, you will be able to support sellers on their own individual growth journeys. In addition, you can rest assured that it will also enable them to feel confident that their chosen platforms can meet all the indirect tax requirements as they increase their cross-border sales.

To learn more about the taxing times for the marketplace and seller relationship, download the latest report by Vertex.

Continue Reading

Business

Unlocking the Power of Data: Revolutionising Business Success in the Financial Services Sector

Published

on

By

Suki Dhuphar, Head of EMEA, Tamr

 

The financial services (FS) sector operates within an immensely data-abundant landscape. But it’s well-known that many organisations in the sector struggle to make data-driven decisions because they lack access to the right data to make decisions at the right time.

As the sector strives for a data-driven approach, companies focus on democratising data, granting non-technical users the ability to work with and leverage data for informed decision-making. However, dirty data, riddled with errors and inconsistencies, can lead to flawed analytics and decision-making. Siloed data across departments like Marketing, Sales, Operations, or R&D exacerbates this issue. Breaking down these barriers is essential for effective data democratisation and achieving accurate insights for decision-making.

An antidote to dirty, disconnected data

Overcoming the challenges presented by dirty, disconnected data is not a new problem. But, there are new solutions – such as shifting strategies to focus on data products – which are proven to deliver great results. But, what is a data product?

Data products are high-quality, accessible datasets that organisations use to solve business challenges. Data products are comprehensive, clean, and continuously updated. They make data tangible to serve specific purposes defined by consumers and provide value because they are easy to find and use. For example, an investment firm can benefit from data products to gain insights into market trends and attract more capital. These offer a scalable solution for connecting alternative data sources, providing accurate and continuously updated views of portfolio companies. Using machine learning (ML) based technology enables the data product to adapt to new data sources, giving a firm’s partners confidence in their investment decisions.

Suki Dhuphar

But, before companies can reap the benefits of data products, the development of a robust data product strategy is a must.

Where to begin?

Prior to embarking on a data product strategy, it is imperative to establish clear-cut objectives that align with your organisation’s overarching business goals. Taking an incremental approach enables you to make a real impact against a specific objective – such as streamlining operations to enhance cost efficiency or reshaping business portfolios to drive growth – by starting with a more manageable goal and then building upon it as the use case is proved. For companies that find themselves uncertain about where to begin their move to data products, tackling your customer data is a good place to start for some quick wins to increase the success of the customer experience programmes.

Getting a good grasp on data

Once an objective is in place, it’s time for an organisation to assess its capabilities for executing the data product strategy. To do this, you need to dig into the nitty-gritty details like where the data is, how accurate and complete it is, how often it gets updated, and how well it’s integrated across different departments. This will give a solid grasp of the actual quality of the data and help allocate resources more efficiently. At this stage, you should also think about which stakeholders from across the business from leadership to IT will need to be involved in the process and how.

Once that’s covered, you can start putting together a skilled team and assigning responsibilities to kick-off the creation and management of a comprehensive data platform that spans all relevant departments. This process also helps spot any gaps early on, so you can focus on targeted initiatives.

Identifying the problem you will solve

Now let’s move on to the next step in our data product strategy. Here we need to identify a specific problem or challenge that is commonly faced in your organisation. It’s likely that leaders in different departments, like R&D or procurement, encounter obstacles that hinder their objectives that could be overcome with better insight and information. By defining a clear use case, you will build a real solution to a challenge they are facing rather than a data product for the sake of having data. This will be an impactful case study for your entire organisation to understand the potential benefits of data products and increase appetite for future projects.

Getting buy-in from the business

Once you have identified the problem you want to solve, you need to secure the funding, support, and resources to move the project ahead. To do that, you must present a practical roadmap that shows how you will quickly deliver value. You should also showcase how to improve it over time once the initial use case is proven.

The plan should map how you will measure success effectively with specific indicators (such as KPIs) that are closely tied to business goals. These indicators will give you a benchmark of what success looks like so you can clearly show when you’ve delivered it.

Getting the most out of your data product

Once you’ve got the green light – and the funds – it’s time to put your plan into action by creating a basic version of your data product, also known as a minimum viable data product (MVDP). By starting small and gradually enhancing with each new release you are putting yourself in the best stead to encourage adoption and also (coming back to our iterative approach) help you secure more resources and funding down the line.

To make the most of your data product, it’s essential to tap into the knowledge and experience of business partners as they know how to make the most of the data product and integrate it into existing workflows. Additionally, collecting feedback and using it to improve future releases will bring even more value to end users in the business and, in turn, your customers.

Unlocking the power of data (products)

It’s crucial for companies in FS to make the most of the huge amount of data they have at their disposal. It simply doesn’t make sense to leave this data tapped and not use it to solve real challenges for end users in the business and, in turn, improve the customer experience! By adopting effective strategies for data products, FS organisations can start to maximise the incredible value of their data.

Continue Reading

Magazine

Trending

Finance2 hours ago

Taxing times for online marketplaces? Operators must act now to avoid losing sellers

By Niall Kiernan, Senior Director of Product Marketing, Vertex   In today’s digital landscape, online marketplaces are an enabler for...

Top 1017 hours ago

Five Ways to Save Money in Your 20s

Depending on your background, entering your 20s can be a bit of a precarious time. Among the things you’ll need...

Business17 hours ago

Unlocking the Power of Data: Revolutionising Business Success in the Financial Services Sector

Suki Dhuphar, Head of EMEA, Tamr   The financial services (FS) sector operates within an immensely data-abundant landscape. But it’s...

Top 101 day ago

Hidden sources of FX risk: could your business be exposed?

Running a business can come with great rewards, but it’s not without risk – something businesses in the UK have...

Finance1 day ago

Preventing fraud and detecting money laundering in real-time

Mathew Hobbis – Chief Architect FSI, Solace   The number of payment channels has grown exponentially. The time it takes...

Top 101 day ago

Money where your mouth is: on the need to modernize insurance tech stacks

Tim Hood, VP, EMEA and APAC, Hyland   Once upon a time, starting an insurance company was a predominantly physical...

Business1 day ago

Making the Maths Work: Addressing Inflation Challenges through Measuring and Managing Risk

Matt Clementson, Head of Enterprise UK&I Persistent inflation is highly troublesome for every business – with or without a recession....

News1 day ago

BioCatch Strengthens Collaboration with Microsoft Cloud for Financial Services

Collaboration Delivers End-to-End Intelligent Banking Cloud Platform with Online Fraud Detection Powered by Next-Generation Behavioural Biometrics BioCatch, a global leader...

Business3 days ago

HOW SMALL BUSINESSES CAN FIGHT BACK AGAINST POOR PAYMENT PRACTICES

SMEs across the UK are facing a challenging economic environment and late payments pose a severe challenge to maintaining cash...

Business3 days ago

Less than a year until EMIR Refit: how can firms prepare? 

Leo Labeis, CEO at REGnosys, discusses everything that financial institutions need to know about EMIR Refit and how they can...

Business7 days ago

Enhancing cybersecurity in investment firms as new regulations come into force

Christian Scott, COO/CISO at Gotham Security, an Abacus Group Company   The alternative investment industry is a prime target for...

Technology7 days ago

How to think like an attacker & why it might be critical to your security strategy

Kam Karaji, Global Head of Information Security for Bibby Financial Services, argues at DTX Manchester that the most successful way...

Business7 days ago

Building a sustainable future – what’s on your agenda for 2023?

The most successful and progressive leaders are embracing ESG or Environmental, Social and Governance principles throughout their businesses, but how...

Banking7 days ago

Digital Acceleration – the next buzzword in banking tech? Or a new era for the industry?

Ove Kreison, CTO at Tuum McKinsey’s latest report on banking found that traditional banks are spending a whopping 85% of their...

Business7 days ago

One year until EMIR Refit: how can firms prepare? 

Leo Labeis, CEO at REGnosys, discusses everything that financial institutions need to know about EMIR Refit and how they can...

Business1 week ago

In the Name of the Family! Firms with CEOs under clan culture influence are much more likely to be internationally focused

In an increasingly globalised world, it is incredibly rare that a firm can expect to grow in the long-term unless...

Finance1 week ago

Regulations, RegTech and CBDCs – Fintech’s Next Chapter 

Teresa Cameron, Finance Director at Clear Junction    Over the last decade, the UK has embraced the fintech revolution with...

Business1 week ago

Gearing up for growth amid economic pressure: 10 top tips for maintaining control of IT costs

  By Dirk Martin, CEO and Founder of Serviceware   Three years on from the pandemic and economic pressure is...

News1 week ago

Find Your Tribe With Content Marketing

Ian is the CMO at Spotler Group   Seth Godin, a writer, speaker, marketing expert, and influencer, describes audiences as tribes,...

Finance1 week ago

The formula for success: delivering total experience in financial services

  Monica Hovsepian, Global Industry Strategist, OpenText   The tumult of the last few years has thrown many challenges at...

Trending