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 (EMDA)

East of England Development Agency (EEDA)

London Development Agency (LDA)

Northwest Development Agency (NWDA)

One NorthEast (ONE)

South East England Development Agency (SEEDA)

South West Regional Development Agency (SWRDA)

Yorkshire Forward (YF)

BARNES ROFFE LLP 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

BARNES ROFFE LLP 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.

Large Medium Small

Tier 1 and 2 10-15% 20-25% 30-35%

Tier 3 n/a 10% 20%

BARNES ROFFE LLP

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?

• Application Forms

• Business Plan

• Supporting documentation

• Accounts

• Evidence of funding

BARNES ROFFE LLP 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.

BARNES ROFFE LLP 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.

BARNES ROFFE LLP 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

BARNES ROFFE LLP

Funding for SMEs

By

ShenYap

BARNES ROFFE LLP Funding for SMEs

• Enterprise Finance Guarantee

• Working Capital Scheme

• Capital for Enterprise Fund

• Enterprise Capital Fund

• Regional Loan Transition Fund

BARNES ROFFE LLP 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

BARNES ROFFE LLP 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

BARNES ROFFE LLP 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

BARNES ROFFE LLP 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

BARNES ROFFE LLP Enterprise Capital Funds (“ECF”)

• 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

BARNES ROFFE LLP

Regional loan transition fund

• Available to businesses outside Greater London only

• Administered by Regional Development Agencies (RDAs)

• Consult with local Business Link or RDA

BARNES ROFFE LLP 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

BARNES ROFFE LLP

Defer paying your tax

BARNES ROFFE LLP

Enterprise Investment Scheme (EIS)

• CGT deferral for investing in your own company• Subscription for shares• Qualifying Companies• Qualifying Trades

BARNES ROFFE LLP

Enhances capital Allowances (Green Allowances)

• 100% First year allowance• Approved product• Energy Technologies• Water Technologies• Cash repayment if company is loss making

BARNES ROFFE LLP 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)

BARNES ROFFE LLP 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

BARNES ROFFE LLP 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)

BARNES ROFFE LLP What are the benefits of making and R&D Claim?

Examples of claims: For every £100,000 a company spends on qualifying R&Dexpenditures:

SME low SME High

Large Co

Incremental amount deductible (up-lift)

£75,000 £75,000 £30,000

Tax benefit/savings £15,750 £21,000 £8,400

Or (when company in loss position) Tax credit £24,000 £24,000 N/A

BARNES ROFFE LLP 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

BARNES ROFFE LLP What Qualifying Expenditures are Eligible?

Large

• Same as SMEs except generally contractors are not eligible

• Can claim for contributions to independent research

BARNES ROFFE LLP 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