What Is The Future Fund?
The COVID-19 pandemic has been especially brutal on SMEs and start-ups, particularly when the lockdown meant many having to close immediately. However, the government has now set up financial assistance in the form of the Future Fund. Its aim is to support small UK-based enterprises that are struggling financially due to the coronavirus outbreak but who aren’t able to claim the Coronavirus Business Interruption Loan Scheme.
The low down
The new coronavirus Future Fund is aimed particularly at high-growth start-ups to help them stay afloat during the current crisis. The initial pledge by the government is to inject £250 million of taxpayer’s money into the scheme which the British Business Bank will administer.
The benefit appears to be in the form of a convertible loan note. For reference, a CLN refers to an amount of short-term debt that is converted into equity shares later in the future. Making an investment into a start-up in this way generally allows investors to obtain a discounted share price based on what the company will be worth in future.
To receive help from the Future Fund, a business must:
- Secure funding from private investors of an equal or greater amount to match what they receive from the fund
- Be a UK-registered private company that has previously raised at least £250,000 in private investment in the last five years.
The Future Fund is set to open this month, with the UK government investing between £125,000 and £5 million in eligible start-ups. The government has also said it will continue to review the scheme going forward, with potential changes and further cash offered in due course. Currently applications can be made until late September.
How to qualify
As mentioned, in order for businesses to be eligible for the Future Fund they need to have raised £250,000 or more, made up of at least £125,000 of their own investment. The Future Fund will then match this.
Note however (and this is important) that the Future Fund isn’t currently compatible with the Seed Enterprise Investment Scheme or the Enterprise Investment Scheme. This means that businesses will need either an angel investor or a Venture Capitalist investor on board who is able to relinquish SEIS/EIS when they invest. It’s also very important that companies double check they will definitely be eligible for - and benefit from - the Future Fund before altering any existing fundraising strategies.
What if I haven’t previously raised £250,000?
Unfortunately, with the Future Fund only accessible to start-ups that have raised £250,000 or more over the last five years, for many this help is simply unobtainable. It has also been pointed out in the media that it will also only really benefit Venture Capitalists as they use the Future Fund to prop up their existing portfolio enterprises. It remains to be seen whether this will be addressed going forward.
£750 million of R&D support
Extra to the Future Fund, the government has also vowed to give £750 million of targeted support to SMEs that display the most intensive, ambitious research and development plans. Offering another valuable avenue in gaining much needed extra cash, the benefit will be available through Innovate UK’s existing grants and loan scheme.
It will work by Innovate UK accelerating up to £200 million of loan and grant payments for its 2,500 existing Innovate UK customers who will need to “opt in”. An additional £550 million will also be made available to boost support for existing customers and £175,000 will also be offered to approximately 1,200 businesses that don’t currently receive Innovate UK funding currently.
Firms can expect first payments to hit their accounts from the middle to end of May.
R&D Tax Credits
In addition to the Future Fund, the government is continuing to support R&D through its long-running R&D Tax Credits incentive. Offered to small and medium-sized enterprises (SMEs) since 2000, the scheme was extended in 2002 to include larger firms.
Part of the appeal of R&D Tax Credits is that the incentive is already well established. Having said that, the application process itself is very complex and pitfalls are easy to fall into. This leads to accidental over claiming as well as to under claiming.
The R&D Tax Credits scheme works by reducing a company’s Corporation Tax liability in respect of the costs it has incurred on research and development activities. As much as 33 pence in £1 spent on R&D projects can be reclaimed and the scope of eligible work - and qualifying costs - is extremely broad. Companies that have made a loss can receive the relief as a cash lump sum instead and even projects that ultimately failed can also benefit.
The key to claiming is in carrying out projects that make a scientific or technological advancement in the field the company operates in. There’s no minimum or maximum claim amount, and eligible costs include staff wages, overheads and materials used up in the R&D process and much more.
Even the smallest of claims can be worth thousands of pounds, which for many businesses is vital now more than ever.
To find out more about the scheme and how to apply, have a look at your R&D Tax Credits page.
The fastest, most accurate way to claim R&D Tax Credits? The Tax Cloud portal
Tax Cloud is an online portal offering UK companies the opportunity to collate their own R&D Tax Credit application just as they would if an R&D claims expert was in front of them. This ensures that all claims are secured and maximised - and at a much lower fee than face-to-face consultancy.
Once you've signed up with us, the R&D specialists at Myriad Accountants (the name behind Tax Cloud UK) will review your claim including your project descriptions and costs, before compiling your claim report. This is then submitted on your behalf, and if HMRC has any further questions that need answering we’ll see to them too. Simple, speedy and supported.
With potentially thousands of pounds of extra cash at stake, why risk missing out? Make your application using the Tax Cloud portal for businesses today or call us on 0207 360 4437. Alternatively you can use our contact form and we’ll be pleased to get back to you.
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