If one of your primary goals as a growing business is to become more ‘investable’ then understanding how tax breaks work for potential investors could be key.
According to SeedLegals, described as the UK market standard for companies raising investment, around two-thirds of UK angel investors won’t invest in a company if the investment doesn’t qualify for SEIS (seed enterprise investment scheme) or EIS (enterprise investment scheme) tax relief.
These government schemes are designed to encourage investors to back high-growth opportunity companies as they begin to trade, with tax relief on offer of 30%-50%.
What many early-stage founders aren’t aware of is that they can apply to HMRC for Advance Assurance – seen as an approval that the company is likely to qualify for tax relief – ahead of a raise.
Mr Investa, a Salford-based buy-to-let property marketplace, recently secured £1 million SEIS/EIS Approval for the start of its seed round, which is being led by London firm SeedLegals, at a valuation of £5m.
“Over the last three years we have been laying some solid foundations for the business and testing our MVP and now the time has come to start scaling our operation,” said Ryan Hughes, MD and founder of Mr Investa.
“We are delighted with the support from HMRC in providing us £1m SEIS/EIS Advance Assurance for our investors, making an exciting and disruptive investment even more attractive.”
SeedLegals, which works with companies to incentivise their teams with share options, apply for SEIS/EIS and manage their cap table, is used in around a third of early-stage funding rounds.
“Advance Assurance does not guarantee that your investment will meet the conditions, but you can use it to attract investors by showing investors your proposed investment is likely to qualify,” the company states.
“It’s proof that if nothing changes for the company, and your deal documents for the funding round are in line with the documents shown to HMRC when you applied for Advance Assurance, then the investment should qualify.”
Advance Assurance cannot, however, tell you if the investors themselves will be eligible for SEIS/EIS tax relief.
Mr Investa’s £1m is an unusually large figure for such an Assurance, Hughes tells BusinessCloud, adding: “Given the anticipated tax hikes and changes to Section 21 and EPC rating, this is a perfect time for Mr Investa to raise and for investors to capitalise on a tax-saving investment.”
The abolition of Section 21 ‘no fault’ evictions – where a landlord can evict a tenant with two months’ notice, without having to give a valid reason – is a major shift in renters’ rights. In effect, a tenancy can only end if the tenant leaves by choice, or if the landlord has a valid reason to evict them.
Hughes also refers to changes to the Energy Performance Certificate system, which could see costs skyrocket for landlords as homes will need to undergo a series of extra checks.
The entrepreneur – part of our cohort of promising businesses at FUEL Manchester 2024 next week – says more landlords are looking to dispose of their buy-to-let properties and portfolios as a result.
“The lack of transparency in the buy-to-let sector has allowed Mr Investa to thrive nationwide, choosing to only deal with built properties whilst offering full detailed insight into the property condition by 3D mapping all units and providing full true financial performance,” he says. “This allows users to make an informed decision from the comfort of their own home or on the go.”
He adds: “Mr Investa is creating a source of knowledge for the buy to let market keeping up to date with the latest trends and legislation changes, allowing landlords to make informed decisions on whether to buy, sell or rotate their portfolio.”