ukie guide - access to finance

7/29/2019 Ukie guide - Access to Finance

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Access to

Finance

06|2013


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contents

02How to pitch: top tipsor attracting investors

04Abertay UniversityPrototype unding

06Business Angels

08Crowdunding

10Enterprise InvestmentScheme

12Production tax creditsand Games publishing

13Venture capital trusts

14Regional GrowthFunds

16Research andDevelopmenttax relie

18Seed EnterpriseInvestment Scheme

20Venture Capital andPrivate Equity

22Other sources ounding

guide - access to unding

ukie.org.uk charlesrussell.co.uk

Ukie21-27 Lambs Conduit Street

LondonWC1N 3BD

0207 534 0580

Vanessa BarnettPartner

[email protected] 7203 5228

Jaclyn WilkinsSenior Associate

[email protected] 7203 5122

@uk_ieUkie on acebook

Ukie on linkedInukie.org.uk

About UkieThe Association or United Kingdom InteractiveEntertainment or Ukie (pronounced YOU-KEY) isa trade body that aims to support, grow and pro-mote the whole o the UKs games and interactiveentertainment industry. Founded in 2010 (althoughormerly known as ELSPA), Ukies membershipincludes all the major UK and global games publish-ers and the best o UK development talent - rompromising start-ups to some o the biggest, mostsuccessul studios operating in the UK today.We also have distributors, academic institutions,new publishers, and media outlets that are integralto the lieblood o the industry as part o the amily.Ukie works with government to champion a rangeo issues including age ratings, education and skills,access to nance and protecting intellectual proper-ty rights. It also works with the media to ensure trueand accurate representation o the sector by raisingawareness o the industrys positive economiccontribution and the societal benets o gaming topolicy makers, regulators and consumers.One o Ukies key roles is to support its membersby providing them with key market inormation, pro-moting careers and oering the business supportservices, training and best-practice knowledge toenable them to operate most eectively.We also oer a comprehensive events programmeto give the games industry access to key inorma-tion, leading industry gures and give everyonethe chance to network. You can see our eventsprogramme here ukie.org.uk/eventsIn addition, Ukie compiles weekly, monthly andannual retail charts and sales reports or the UKmarket.

About Charles RussellExperts in interactive entertainment

Our legal services

Digital media and entertainment Technology licensing and development Corporate and commercial Employment and pensions Dispute resolution Real estate ntellectual property Private client Family

A frm with talentServices & lawyers ranked in legal directoriesincluding: Chambers UK Chambers Global Legal 500

Including Vanessa Barnettand Jaclyn Wilkins whoare ranked as experts in computer games anddigital media

A frm on the move

Recruitment o industry experts Strong heritage in technology, digital media

and entertainment International capabilities Over 400 lawyers


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We know that accessing fnanceis a problem acing games

and interactive entertainmentbusinesses throughout the UK.There is money available i youknow where to look and Ukies

Guide gives a summary o wheresome o these pots o money areand how to make useo them.

guide - access to unding 02


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How to pitch:top tips or attracting investors

You can have the best game inthe world, operating the bestbusiness model, on the rightplatorm but without beingable to pitch your product toinvestors you may not be ableto access the money you needto grow your business.Here are eight easy tips to help you deliver the perect pitch:


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3

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5 8

Your Team:

Investors can oten see entrepreneurs

as not being ocused on building thebusiness - can you demonstrate thatyou have built a team around you thatcan both build the business and sellthe product - or that you understandwhere your gaps are and will use thisangel investment to hire the core teammembers? Dont be araid also to identiywhat the investors can bring in terms ostrategic advice and business skills toyour board - this can be attractive to aninvestor who would like to really help thebusinesses they invest in.

Valuation:

Valuing a games business is one o

the hardest things or investors. Itsvital to be realistic, especially i you arenot trading and also be prepared tobe fexible- you should not be lookingto give away more that 25% o yourcompany in the rst round - so showyou know the market and can giveinormation about other comparablesuccesses, do not infate valuationsor haggle over terms and stock. Letexperienced proessionals, lawyersand accountants handle the terms andvaluations.

Demonstrate how you can build a

scalable business model:

I its a single game, can you build aplatorm or what else can you createon the back o this? Whilst this couldinclude using a reemium model initiallyto show market validation, you needto show how you can then build arevenue base and monetise your gameproduct and build prot over a 2-5 yearscenario.

Intellectual Property:

How can you use your brand andcustomers to give you marketadvantage and build a deensiblecompetitive position. Also, have youconsidered how you are protecting yourintellectual property or instance, doyou have valid transers o ownershipin any IP that has been created byreelancers or your business?

Investment Proposition:

Dont orget to tell investors how muchyou are looking or and what youneed the money or and what you willspend it on. Keep your investors happyby regularly updating them on thecompanys progress.

Create a prototype and line up Beta

Testers:

Having a prototype will increase yourchances o attracting investors anddemonstrating that you can attractpaying customers will put you one stepahead.

Understand your competition:

Show that you understand who elseis out there and how you can reallydierentiate your game or model romothers in the market place.

Exit and Returns:

Remember Angel investors in particularneed to exit over a ve to eight yearperiod and look to achieve a ten timesreturn on their investment. You will needto let them know how much has beenpaid or similar games companies thathave been acquired.


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How does the process work?Grants o up to 25,000 are availableor Small or Medium Enterprises (SMEs those with ewer than 250 employeesor turnover below 50m) based in

the UK who wish to prototype theirown intellectual property (IP). Abertaysupports games projects and otherorms o interactive digital content, suchas e-learning, visualisation, interactiveexhibits, online lm / broadcast media,or middleware.

The purpose o the prototype und isto oster economic growth, help jobcreation,and develop skills through theormation o new UK businesses.

How can I apply or prototypeunding?There are two ways to apply to thePrototype Fund:

+ The standard model+ The commissioning model via

separately announced contests

In the standard model, SMEs come upwith their own independent ideas andapply or the grant in a rolling series ounding rounds.

In the commissioning model Abertayworks with commercial partners (suchas developers and publishers) who wantto develop new IP through a third-partySME.

The commissioning partner doesnot need to be an SME to work withAbertay, but they must be sucientlywell resourced to manage the

development process and providea route to market or the IP beingprototyped. Details o contests withcommissioning partners are announcedperiodically on the Abertay website.

http://prototypeund.abertay.ac.uk/contests/

What is the application process?A set o criteria is applied to each othe applications (such as innovation,potential or growth, and commercialviability) and reviewed by an approvalpanel which includes external industryrepresentation. From the initial

application Abertay always aims to makea decision within a three month period.

Abertay wants to see applications romsmall, new businesses because theirunding will be o greater benet andso they are more likely to be successulapplications.

1. Sources o undingAbertay Universityprototype unding

Prototyping is vital or gettingproducts to the stage whereother fnanciers may be willingto step in, or where a publisherwill commission urtherdevelopment.The prototype lab and centre o excellence at AbertayUniversity allows small games developers across the UK toapply or grants o up to 25,000 to support the development oully-working prototypes.

+Find out more:You can nd theapplication orm or thePrototype Fund and moredetails on the Abertaywebsite.

http://prototypeund.

abertay.ac.uk/unding/image: plastudios.co.uk/


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Business Angels

Business angels are privateindividuals seeking to invest theirown spare fnancial capacityin small businesses, generallyworking with start-ups or earlystage development projects.Business angels are oten successul business people in theirown right, who can oer new games companies experience andmarket contacts to support the growth o the business. Angelsmake their own decision about investing and normally takeshares in the company in return or unding. Whilst some investas an individual, the trend is or angels to invest in groups orsyndicates, enabling them to both pool their fnance and theirskills, although usually there is a lead angel who will act on behalo the syndicate both in the negotiations and in ollowing up thedeal.

Many angels like to ollow-their deal and want to keep in touchwith you oten taking a seat on your board.

Whilst the market is relatively difcult to calculate since manybusiness angels are investing privately, an estimated 850m perannum is invested by business angels annually in the UK. Thisis more than 2.5 times the amount o Venture Capital invested inearly stage small businesses annually. Whilst it is also estimatedthat there are about 18,000 angel investors around the country,many individuals are still not aware o this asset class and thereis a need or more individuals to become business angels touse their fnance and experience to support the growth o smallbusinesses. For more inormation on the Angel Market pleasesee: https://www.gov.uk/government/uploads/system/uploads/attachment_data/fle/32214/10-994-annual-report-business-angel-market-2008-2009.pd .

+Where can I fndout more?

For or urther inormationvisit:www.ukbusinessangels

association.org.ukUK Business AngelsAssociation is thenational trade association(England, Wales andNorthern Ireland) thatrepresents and connectsall those involved inthe angel investmentmarket, including earlystage Venture Capitalunds, banks and alsonon traditional sources onance.

www.lbangels.co.uk

London Business Angels

is one o Europesleading Angel InvestmentNetworks, connectingcompanies and investorsthrough their membershipscheme.

www.beerandpartners.

com

Is another sourceo Venture Capitaland Business AngelInvestment in the UK.

Angels can gain a substantial tax break or investingin your business; these measures are oered underthe Enterprise Investment Scheme (EIS) and therecently introduced Seed Enterprise InvestmentScheme (SEIS) oering up to 30% and 50% taxrelies respectively to investors. Thereore you will beespecially attractive to investors i you can show thatyour business satises the criteria or these tax relies(see below or more inormation on both o these

schemes).

Business angels can include amily or riends o thebusiness owner who want to invest money into theparticular company or project. However, amily andriends will not be able to claim tax relies under EISor SEIS because they will be classed as connectedpersons.

Angel investment is high-risk, as the business inquestion is oten an unknown quantity. It is estimatedthat 40-50% o all investments made by businessangels do not return their original investment; so manyinvestors will put unds into a variety o projects tospread the risk. Notably, when developing your pitchto attract business angels, they are generally lookingor a ten old return and an exit rom your business

within 5-8 years, so youneed to show how youcan scale your businessand provide a suitable exitstrategy.

image: angelsden.co.uk


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There are three dierent methods oraising investment in this way thinkabout which best suits your needs:

+ The Donations Model:Funders provide money to a companyor or a project either or no return orin return or some orm o nonnancial reward. For example, a copyo the game that youre backing,getting your name mentioned in thegame or a meeting with the creators.

+ The Lending Model:

Funders provide money by way o aloan with a requirement that the loanis repaid with interest.

+ The Investment Model:Funders provide money in return or ashare o prots. The InvestmentModel can itsel take one o twoorms:

+ The Securities Model:A under invests money in acompany and receives shares inthat company.

+ The Collective InvestmentScheme Model:

A under invests money in aproject in return or a right to ashare in the prots or in therevenues generated by thatproject, but does not receiveshares in the companyundertaking that project.

There are more than 40 crowdundingplatorms operating in the UK andmany others across the world, somespecialising in games, like Gambitiousand Indiegogo.

Most operate on a donations or loansbasis but a ew investment platormshave obtained permission to operatean equity model. There are a lot o legalhoops to jump through to operate anequity model, which means its harderor ordinary people who might wantto nancially invest in an idea do so.These hoops principally exist to protectconsumers rom unsuitably high risk orraudulent investments, but they alsoprevent platorms rom oering simpleways or ans to invest in the creation oprojects and be rewarded or doing so.

We are working to change this.

Ukie is currently calling on government tomodiy the UKs regulatory environmentto allow investors, content producersand crowdunding platorms to takemaximum advantage o crowdundinginvestment models.


Crowdunding

Crowdunding is increasinglybeing used to und video gameand interactive entertainmentprojects.There are lots o crowdunding platorms operating legally in

the UK and across the world. In a crowdunding model (alsosometimes called crowd fnancing and crowd sourced capital)individuals, oten complete strangers, pool together to unda company or a project in return or the possibility o somereward, by way o an investment platorm.

+How can I fnd

out more aboutcrowdunding?

There are manybusinesses oeringcrowdunding platormsthat you can use amongst them are:

www.indiegogo.com

www.kickstarter.com

www.gambitious.com

www.crowdunder.co.uk

The internet has considerably increased the size o the potential investment audienceand made the management o individual pledges considerably easier. Websiteseectively set up a Paypal type account providing a platorm or investment and you as acompany will appeal or a sum o target investment. Many platorms do not have a lowerlimit and thereore accept as little as 10 in unding. The hosting platorm generally takesaround 5% in commission. In return the investor will receive either share equity and/or anexclusive git such as a copy o the companys game when the target sum is reached.

These platorms test the appetite or your games, allowing you a page to advertiseyour company and the investment platorm; this can give you a handy armoury osocial network metrics such as likes or your idea to present to other potentialinvestors, commissioners or publishers.

There are two types o crowdunding scheme:

All or nothing A target is set or the required level o investment within a time limitand the unds are only released to the business or individual once the target hasbeen reached. I the target is not reached the investments are returned.

Keep it all A target is set above, but whether unds are returned or not is at thediscretion o the individual or business.

The hall o ame o crowdunding success stories is growing and includes the creatorsbehind the game Star Citizen who sought to raise $2 million on Kickstarter. In actthey raised $6.3 million in unding rom over 90,000 ans. The creators o the Pebblewatch, a watch which syncs with a smartphone raised over $10 million on Kickstarter.


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Venture Capital andPrivate Equity

Venture capital and privateequity are sources o fnanceprovided in return or an equitystake (shares) in potentiallyhigh growth companies.Venture capital and private equity provides companies withthe personal experience o the investors and a stable fnancialbase on which to make strategic decisions. Venture capital isa part o the private equity industry. It reers to unds used toinvest in companies in the seed, start-up and early stages odevelopment. Private equity generally reers to investment inmore mature companies through management buy-outs andbuy-ins.

Venture Capital is attractive or new companies with a limitedoperating history that are too small to raise capital in the publicmarkets and have not reached the point where they are ableto secure a bank loan. In exchange or high risk investmentventure capitalists usually get signifcant control over company

decisions.

guide - access to unding12

Are games businesses attractive to Venture Capitalists?Video games and interactive entertainment businesses can be especially attractiveto venture capitalists. However these investors can be risk averse and only reallyinterested in companies with high growth prospects, which are managed byexperienced and ambitious teams who are capable o turning their business planinto reality. Nonetheless, provided you can demonstrate there is real growth potentialthe private equity industry is interested in all stages, rom start-up to buy-out. Havingmetrics, business models and a proven track record can help make your companymore attractive to private equity investors.

What are Venture Capitalists lookingor in an investment?

Venture capitalists look to invest largesums o money in businesses, in returnor equity. Venture capitalists typicallyinvest in businesses with:

+ A minimum need o around2 million (though many smaller

organisation exist who invest rom

50,000);

+ An ambitious but realisticbusiness plan;

+ A product or service oering aunique selling point;

+ A high return on investment withina specifc timerame, e.g. 5 years;

+ Sound management expertise;+ A proven track record.

+Where can I fnd outmore?The British VentureCapital Association(BVCA) has over 200members andrepresents the privateequity and venture capitalindustry. The BVCAprovides inormation

about private equitycompanies and oersan online search acility.Private equity companiesoten specialise incertain industry sectors,geographic areas and inspecic growth stages,such as seed capital.

www.bvca.co.uk


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Games publishing

In spite o the rise in developerssel-publishing their games,publishers still remain amajor source o investment insome areas o the games andinteractive entertainment marketand they will invest in a videogame developer to fnance thecreation o their game.

Games publishers also provide essential skills to get a gameto market and due to their investment in a project will havean interest in its success. Games publishers can also bevery good at managing the risk o developing a game andthereore oer invaluable advice to those they invest in.

Ukie represents all the main publishers currently in the UK, as well

as some o the newer publishers emerging who specialise in mobilegames. I you would like to speak to a publisher [email protected] line.

Venture Capital Trusts

The Venture Capital Trusts(VCT) scheme is a governmentscheme designed to encourageindividuals to invest indirectlyin a range o small higher-risk trading companies whoseshares and securities are notlisted on a recognised stockexchange, by investing insteadthrough VCTs.VCTs are companies admitted to trading on a regulatedmarket. They are similar to investment trusts and are run byund managers who are usually members o larger investmentgroups.

VCTs oer individuals incentives to invest through various Income Tax

and Capital Gains Tax relies, and VCTs are exempt rom CorporationTax on any gains arising on the disposal o their investments.

+You can nd more inormation here:http://www.hmrc.gov.uk/guidance/vct.htmhttp://www.iii.co.uk/investing/vct-eis


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Regional Growth Funds

The Regional Growth Fund(RGF) is a 2.6bn challengeund operating across Englandrom 2011 to 2016. It isadministered by the Departmentor Business, Innovation andSkills (BIS) and supportsprojects and programmes thatuse private sector investmentto create economic growthand sustainable employment.It ocuses especially in helpingthose areas and communities

which were dependent onthe public sector to makethe transition to sustainable,private sector-led growth andprosperity.

Access to the und operates on a bidprocess, with all bids competing witheach other. The threshold or all bids is1million. The ourth round o bids closedon 20 March 2013 with the Governmentlooking to allocate up to 350million tohigh quality bids. Further rounds will beannounced in due course.

Have games companies made successul bids?Games companies are very much encouraged to applyand have previously been granted considerable RGFunding. In 2011 leading independent game creatorsEutechnyx, announced that they were successul inwinning a regional growth und o 1.8m rom theGovernment.rther rounds will be announced in 2013.

+Where can I fnd outmore?

More about the und anddates o urther roundscan be ound here:https://www.gov.uk/

understanding-the-

regional-growth-und

The application process isairly straight orward andyou can nd the ormsand lots o guidance andsupport here:www.bis.gov.uk/rg

You can also get urtheradvice by emailing orcalling the RGF team at:[email protected].

gov.uk or on 020 7215

6758/0207 215 3821- tryto complete the projectsummary section o theapplication in advance tohelp them prepare you

can also get support romyour BIS local team.

For some useul casestudies please see:https://www.gov.

uk/government/

organisations/

department-or-

business-innovation-

skills/series/

regional-growth-und-

rg-case-studiesimage: http://www.4t2.co.uk/


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+FundMapprovides easy navigationto the grants and undingavailable to businesses inthe UK technology sectorwww.undmap.co.uk

+R&D / Innovation undingavailable rom TechnologyStrategy Board.The TechnologyStrategy Board supportsinnovation by providingaccess to unding acrossa range o programmes.www.innovateuk.org/unding-competitionsClosing date: Ongoing

+SMART Grants or R&D(single business)scheme oering undingto SMEs to engage inR&D projectswww.innovateuk.org/-/smartClosing date: Ongoing

+Arts Council Englandgrants or individualsand organisationsUp to 100,000 orindividuals andorganisations.www.artscouncil.org.uk/unding/apply-or-unding/grants-or-the-arts/Closing date: Ongoing

+5 million loan und orcommunity businessesFinancial support romRBS in the orm oloans or the purposeo starting or expandinga community-basedbusiness.tinyurl.com/cr9sew5Closing Date: Ongoing

+The FSE GroupThe FSE Group is a undmanagement group witha new ocus on socialimpact unding.www.thesegroup.com/?id=1654Closing date: Ongoing

+Social Incubator FundA und set up orsocial ventures to takeadvantage o socialinvestment opportunitieswww.bigund.org.uk/global-content/programmes/england/social-incubator-undClosing date: Ongoing

+MEDIA FundingThis programme oersEuropean companiesactive in the audiovisualsector a range o supportschemes. Currentcompetition includesInteractive ProjectsDevelopment unding anda call or Single ProjectDevelopment proposals.www.mediadeskuk.eu/unding/Closing date: Various

+Unlimited Awards orsocial entrepreneursUnLtds MillenniumAwards provide practicaland fnancial supportto social entrepreneursin the UK; people withvision, passion, drive andcommitment, who wantto change the world orthe better. They currentlyoer 2 levels o award,rom 500 to 15000.unltd.org.ukClosing date: Ongoing

+Capitalise Business LoanFinancial assistanceis available to start-upand existing businessesor social enterprisesin Sussex, Kent orSurrey to help with theirdevelopment and growth.www.capitalise.org/Closing date: Ongoing

Other sources o undingguide - access to unding 18


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2. Tax relie available toinvestors in start ups andsmall businesses in theinteractive entertainmentand games industryIn order to ensure your start up is as attractive as possible topotential investors, games developers should be aware o thevarious tax relies and qualifcation criteria or small businessesthat will enable investors to beneft rom these tax breaks.

Enterprise Investment SchemeThis scheme oers tax relie (both income and capital gains)to investors who put money into qualiying small, growthbusinesses by buying shares in it. It is the bigger sibling othe Seed Enterprise Investment Scheme or SEIS (see below),which oers tax relie or investment in the very early stage o acompanys lie, otherwise known as seed start ups.

How does a company qualiy?The EIS is designed to incentivise investment in smaller, higher-risk companies. As

such, several criteria have to be met by the company receiving the investment. Theollowing criteria must be met:

+ The group o companies to which it belongs must have 250 or eweremployees

+ The group o companies to which it belongs must be a small company have Gross Assets o no more than 15 million beore the investment, and no

more than 16 million immediately ater it

+ Carry on a qualiying trade as defned by the EIS+ Not be listed on any recognised stock exchange (except under AIM)+ Not be controlled by any other company+ Have a permanent establishment in the UK+ Any subsidiaries must be more than 50% owned

Ater the shares have been held or three years, anyprot that is made rom selling them is not subject tocapital gains tax.

I the shares are sold at a loss, the amount o the loss,minus any Income Tax relie given, can be set againstincome o the year in which they were sold, or anyincome o the previous year, instead o being set oagainst any capital gains.

Finally, the payment o tax on a capital gain (orexample on the sale o any assets held by an individual)can be deerred i that gain is invested in EIS-qualiyingshares. This investment must be made within the yearbeore the gain arose, or three years ater. Unlike theincome tax relie, this is available to people who areconnected to the EIS-qualiying company.


Contact details can beound here:http://www.hmrc.gov.

uk/eis/add-ino.htm

You can nd out moreabout EIS and SEIS here:

http://www.hmrc.gov.

uk/seedeis/procedures.

htm

Each company is limited to raising no more than 5 million investment in any 12month period. This includes money raised through Venture Capital Trusts, (VCTs), aswell as through the EIS, SEIS and other investments that qualiy as state aid.

All shares must be paid or, in ull, when they are issued. Not doing so is one o themost common reasons or investments ailing to qualiy or EIS tax relie. They mustbe ull-risk, ordinary shares, with no special protection i the rm winds up, or romany o the other normal risks associated with investing in shares, or example theycannot be preerence shares.

People who are connected to the company own more than 30 per cent oit, or are employed by it (non employee directors can only participate in limitedcircumstances), cannot claim income tax relie under the EIS scheme. See the

HMRC pages or a ull explanation.

What does the investor receive?Investors must invest at least 500 in shares in the company in a single tax year toqualiy or the EIS. In return, investors receive 30 per cent income tax relie on thecost o any EIS-qualiying shares they buy. This can be claimed up to a maximum o1,000,000 invested in shares, giving a maximum reduction on the investors incometax bill o 300,000 in any one year.

Shares must be held or at least three years, or the income tax relie earned will bewithdrawn. The money raised by the share issue must be used in the companys tradewithin two years o the issue date.


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+Where can I fnd outmore?You can nd out more

about EIS and SEIS herewww.hmrc.gov.uk/

seedeis/procedures.htm

www.hmrc.gov.uk/eis/

index.htm

HMRC runs a SmallCompanies EnterpriseCentre which administersthe scheme. Ukie membersare advised to contact theSCEC or ormal clearancethat they qualiy or the EISand SEIS, beore issuingshares. Contact details canbe ound herewww.hmrc.gov.uk/eis/

add-ino.htm

The Enterprise InvestmentScheme Association(EISA), a trade body oraccountants, lawyersand proessional rmsadvising EIS companiesand investors, are alsoable to provide generaladvice to Ukie members.Find out more here.www.eisa.org.uk

Seed Enterprise InvestmentSchemeThe Seed Enterprise Investment Scheme (SEIS) is designed to help small, early-stage companies to raise nance by oering a range o tax relies to individualinvestors who purchase new shares in those companies. It complements theexisting EIS described above which oers tax relies to investors in higher-risk smallcompanies. SEIS is intended to recognise the particular diculties which very earlystage companies ace in attracting investment, by oering tax relie at a higher ratethan that oered by the existing EIS.

SEIS applies or investment made on or ater 6 April 2012. The rules have beendesigned to mirror those o EIS as it is anticipated that companies may want to goon to use EIS ater an initial investment under SEIS.

The Governments Seed Enterprise Investment Scheme (SEIS) is designed to helpsmall, early-stage businesses to raise money by oering a range o tax relies toindividual investors. Investors can receive income tax relie worth 50 per cent o theamount they invest making investing in start-up businesses a considerably moreattractive proposition.

How can games and businesses beneft rom SEIS?The new SEIS makes unding games and interactive entertainment start-ups a lessrisky proposition to potential investors.

I your company is seeking unding and ts the ollowing qualication criteria youshould discuss SEIS with any potential investors. The ollowing criteria must be met:

+ The group o companies to which it belongs must have 25 or ewer employees+ The group o companies to which it belongs must have no more than200,000 in assets at the time the investment is made

+ have a UK permanent establishment+ be undertaking a new business (be a start-up)+ not be listed on any recognised stock exchange+ not have previously raised money under the Enterprise Investment Scheme

or Venture Capital Trust scheme

The investor must not be employed by the company or have more than a 30% stakein it, which means it is unlikely that people could use SEIS to gain relie or investingin their own businesses. Each company can obtain a maximum o 150,000 undingthrough the SEIS.

What does the investor receive?Each investor can input up to 100,000 in a single taxyear through the SEIS, with unused annual amountsable to be carried back to the previous year (but not inthe rst year o the scheme). This investment has to bein the orm o shares.

They receive income tax relie worth 50 per cent o the

amount they invest in that year. That is, they can claimback up to 50,000 o income tax they pay in that taxyear, regardless o their marginal rate, i they invest theull 100,000.

Once the shares have been held or three years, anyprot that is made rom selling them is not subject tocapital gains tax.

A special provision is in place or the tax year 2012/13:prots rom the sale o assets in this tax year areexempt rom capital gains tax, as long as these protsare reinvested through the SEIS in this same year. Thisapplies whether the asset is sold beore or ater theSEIS investment is made. This is to be extended tothe 2013/14 tax year, but will only apply to 50% o thegain.

Ukie will also be working to raise awareness o thescheme and the growth potential o UK gamesbusinesses to the investment community.


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3. Tax relie availableto developers andentrepreneurs ostart ups and smallbusinesses in the

interactive entertainmentand games industry

Production tax creditsDrat legislation granting tax relie orcompanies involved with the developmento video games was introduced in the

April 2013 budget (subject to EU state aidapproval), the aim o such relie being topromote sustainable production o culturally

signifcant video games in the UK. Qualiyingentities and persons will be able to claimtax breaks on expenditure spent on thedevelopment o a video game intended orthe public.

However, there is a delay in the grantingo EU state aid approval. The length o thedelay is presently unknown. This will meanthe start date o when thetax relie can be claimed willbe pushed back.


For urtherinormation on thedevelopment othe budget andproposed Finance Bill2013 please seehttp://www.hm-treasury.gov.uk/d/corporation_tax_relies_or_the_creative_sector.pd


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Is your company eligible?The relie is available to small, medium and medium largeenterprises, being companies who together with only25% subsidiaries have ewer than 500 employees and anannual turnover not exceeding 100m or a balance sheetnot exceeding 86m.

HMRCs guidance on the programme runs to 400+pages, so theres a lot to consider! To keep things assimple as possible our partners Jumpstart (see below orurther inormation) apply their 30-second test.

By answering the questions you may be able to gaugewhether your company would benet rom a more

detailed assessment o its projects.

Approach to technology- I would say that mycompany attempts to develop new technology, asopposed to just using it. Some o our attempts to do sohave ailed or technical reasons, as what we were tryingwas surprisingly dicult to achieve.

Approach to improvement - I would say thatmy company tries to make measurable, objectiveand signicant improvements to the design andimplementation o its products.

Approach to problem solving - When aced witha challenging technical problem, my company usesinternal, qualied and experienced sta to design thesolution, using subcontractors to perorm easily denedand non-challenging tasks.

I you have answered yes to any o the above theres agood chance that you may be eligible or a claim.

How can I claim R&D tax relie?Ukie members can get ree advice rom R&D taxspecialists Jumpstart about how R&D tax credits canbenet their businesses by calling 0131 240 2900 oremailing: [email protected]

Ukie members can access, at exclusively preerentialrates, the services o R&D tax credit specialistsJumpstart. www.jumpstartuk.co.uk


Research and Development(R&D) tax relieWhat is R&D Tax Relie?I you are involved in attempts to develop technology, your company is likely to beeligible or this tax relie as the video games and interactive entertainment industryhas a clear and strong link to high tech R&D.

The Governments R&D scheme gives tax deductions to UK companies investingin R&D. This scheme allows UK rms undertaking R&D to deduct rom theircorporation tax an amount proportional to their qualiying R&D expenditures.

Lots o games businesses undertake R&D, sometimes without realising it thismight sound dat, but companies have received a lot o money rom this schemeon engine development, new processes and so on, so its always worth checkingwhether you can qualiy.

+JumpstartJumpstart, which wasormed in 2008 and isbased in Edinburgh,hosts a highly skilled,31-strong team whichis ocused solely onpresenting detailed,

accurate and compliantR&D tax creditsubmissions to HMRC. Ithas already saved clientsin excess o 12 million,with many times that sumin the pipeline.

Jumpstart has aremarkable track recordo success in 98.6% othe claims which it hastaken on signicantlyaecting the bottom lineo companies across theUK.

Jumpstart employsteams with the scienticand technical knowledgeto identiy and justiyeligible projects or R&Dsubmission. It dealsdirectly with the stainvolved in developmentto extract the relevantinormation whichexplains why the projectmeets HMRC criteria oreligibility.

What kind o things can I claim or?Many sotware and games developmentcompanies have been able to makesuccessul claims or work to:

+ Overcome the perormancelimitations o current technology

stacks, development environments

and mobile devices;

+ Overcome the challengesinvolved in attempting to process

huge volumes o data in real ornear real time;

+ Develop more eective game andrendering engines to make better

use o limited processing power

or memory;

+ Improve the speed with whichgames perorm on a variety o

platorms;+ Develop better methods o porting

games between platorms; and to+ Develop the capabilities o open

source platorms and technologies.

How much can I claim?Your business can potentially claim theollowing:

+ 175% o qualiying expenditureor R&D undertaken rom 1

August 2008 to April 2011

+ 200% o qualiying expenditureor R&D undertaken rom April

2011 to April 2012+ 225% o qualiying expenditure

or R&D undertaken rom April2012

How can I claim R&D tax relie?To help our members take ull advantageo the potential nancial gains o R&Dtax credits, Ukie members can access,at exclusively preerential rates, theservices o R&D tax credit specialistsJumpstart.


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