How a coffee saved an entrepreneur £50,000

Sometimes making the time to have a coffee with a tax adviser can really pay for itself.  

We found ourselves in a scenario in Autumn that was really good fun to deal with. A quick conversation turned into a successful outcome for a client who unexpectedly saved £50,000 – and it wasn’t the original purpose of having a coffee!

We had a chat with a contact who had set up and ran technology companies, but had successfully exited a business some time ago. He was about to move into something completely different by buying a restaurant.

The conversation went as follows:

MHA Tait Walker:Exciting times – you’re going from the tech sector into restaurants?

Client: Yep, I’ve just set up a new company and I’m about to spend £500,000 on the trade and assets of a restaurant, including the building!

MHA Tait Walker: When did you sell out of your last business? I hear it was very successful!  

Client: I’ve been out of “tech” for about two years. I got an offer I couldn’t refuse so I sold out completely. I’ve been looking around for my next venture but I’ve dabbled in a few Crowdcube investments since.

MHA Tait Walker: Have you put your £500,000 in to buy the trade and assets yet?

Client: No, I’ve just set up an “off the shelf” company and I’m meeting the lawyers soon to move the purchase along. I’m just going to put the money in as a director’s loan.  

MHA Tait Walker: What if we could reduce the cost of the restaurant by £50,000?

Client: Sounds good!?

MHA Tait Walker: Thought so! Don’t put the money in as a director’s loan – put it in as new share capital.  

Client: And that will save £50,000!?

MHA Tait Walker: We’ll wager you haven’t heard of EIS Deferral Relief?  It’s the lesser known and often forgotten part of the Enterprise Investment Scheme. Basically, we can use Deferral Relief to get you back some of the Capital Gains Tax on the sale of your tech company shares. 

Client:  You win, never heard of Deferral Relief! But hasn’t the Enterprise Investment Scheme been restricted to really risky technology and bioscience type companies – the stuff on Crowdcube?

MHA Tait Walker: The good news is that EIS Deferral Relief applies to a much broader range of companies than the “ordinary” EIS relief that a lot of people use. We can probably even claim it on the money you’ve invested into Crowdcube, too! But if you’re going to speak to the lawyers about the set up, can we come along and we’ll make sure its all set up correctly so you get deferral relief?

Client: Please do, they can get the coffee!

That’s how a brief chat over a coffee unexpectedly saved a serial entrepreneur 10% of the cost of a new business venture (for completeness, the EIS Deferral Relief claim has accepted by HMRC).

If you have paid capital gains tax in the last three years and you would like to understand how EIS relief might assist to reduce the cost of your next business venture, please contact Ryan Keltie or Alastair Wilson.