Growing a business can be an exciting time, but it will also come with concerns and questions in relation to a whole raft of issues.
For many businesses, key issues and barriers to growth include knowing how and where to raise funds, how to identify, protect and commercialise your intellectual property, how and when to claim R&D tax credits and also legal and HR issues concerning your workforce.
On 27 February 2020, Darwin Gray, Gerald Thomas, Raising Partners and Development Bank of Wales will be providing a free Business Growth Workshop to discuss these issues. The roundtable workshop will be a chance to sit down with experienced professionals and ask any burning questions and also share your concerns. Find out more here.
Here is an outline of the topics up for discussion:
Employment / HR
As your business grows, you’ll need to take on more staff. Whilst having a team of people behind you is an important asset to your business, you’ll need to be mindful of employment law:
- Contracts of employment: by law, you must have a written contract in place between you and your employees, and a well-thought-out employment contract can be invaluable in avoiding disputes further down the line. In addition, from 6 April 2020 the rules around what should be included in an employment contract are changing so that more information will now need to be included. Also, from 6 April you will need to provide a written contract to all workers, not just employees.
- Staff handbook: it is good practice to have a written document containing your policies and procedures, setting out the standards you expect of your staff. It will also help the smooth running of your business and reduce the legal risks by making sure that your staff understand the rights and responsibilities inherent in the employment relationship. Some information must be set out in writing, such as your disciplinary and grievance procedures, pension information, and your health and safety policy (if you have 5 or more employees).
- National minimum wage: you must ensure that you pay your staff the prescribed minimum hourly rate of pay in order to avoid criminal and/or civil penalties. The rates of the NMW are updated annually, and from 6 April 2020 the rates will increase to the following: £8.72 per hour for workers aged 25 and over; £8.20 per hour for 21 to 24-year-olds; £6.45 per hour for 18 to 20-year-olds; £4.55 per hour for under-18s; and £4.15 per hour for apprentices.
R&D tax credits
There is an under-the-radar tax relief available to any company currently undertaking research and development (R&D) activities. Many companies, of all kinds, carrying out R&D are unaware that this tax relief is available to them and it’s currently one of the most generous of its kind in the UK.
R&D relief is available to a very wide spectrum of companies which carry out eligible projects including, although not limited, to those in the food sector, the science arena, manufacturing industry, and even construction.
So, what is this tax relief?
R&D tax relief allows small and medium-sized firms to uplift their relevant expenses by around 130%.
For example, if a company spends £100,000 on staff to develop new software, that qualifies as R&D.
The expense is uplifted by £130,000 for corporation tax purposes, resulting in an additional tax saving of £24,700 (using 19% as the corporate tax rate), giving total tax relief of £43,700.
If the company was not yet profitable, the R&D expenditure can be surrendered for a cash payment, receiving a payment from HMRC of up to £33,350 (14.5% of the expenditure).
What projects qualify?
It may not be obvious to the company owner that R&D is taking place because of the perception that it needs to be done by a person in a white coat in a lab somewhere.
R&D takes place where a project 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.
In fact, if a project fails having undergone R&D, the tax relief can still be claimed.
The question to ask yourself is, “did we do something where there was uncertainty of the outcome at the beginning?” If the answer to that question is yes, the possibility of an R&D tax relief claim should be explored.
Intellectual Property Rights (IPR)
Identifying, protecting and commercialising your IPR is key to the growth of most commercial businesses.
If your business is largely based around intellectual property, for example product design, then you will most likely have already come across and addressed these issues. However, for many businesses, IPR is not considered such an important asset because it is on the periphery of what they do. The Business Growth Workshop will cover the importance of identifying and protecting your IPR and also the opportunities it may present for growing your business.
Consider the following scenarios:
- Company A is a software developer and key coding was written by one of the founders before the company was incorporated. This might lead to a dispute further down the line as to who owns the IPR in a vital piece of coding.
- Company B has used a contractor to undertake product design work. Whilst the company has paid for the work and therefore has a licence for its use, there may be a dispute as to ownership of the work in the future.
- Company C is undertaking R&D work with a client but no agreement has been reached as to who will own the results. If the research is successful then there may be a dispute over ownership which could be costly and time consuming.
- Company D has developed business training programmes which it uses as part of its service delivery to its clients. However, it has not considered licensing the programmes to third party providers, thus missing out on a potentially valuable income steam.
Securing the right funding for your business is critical and very much depends on the stage the business it at. Come along on 27 February to:
- Find out what type of funding you should be looking for, be it grant, equity, loan, mezzanine or a combination of sources.
- Find out where to look for these types of funding and what you may be asked to give up in exchange.
- Learn the basics of the different types of equity investors and the basic different types and classes of shares equity investors use, from ordinary shares and class A shares to convertible loan notes (CLNs).
- Gain a basic understanding of how to value an early stage business and how equity investors get a return on their investment.
To book your free place at this Business Growth Workshop on 27 February, visit here.