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The EIS is a great way to attract top talent for your fintech business…here’s why

Using the EIS to make your fintech start-up attractive to top international talent

When it comes to attracting the sort of top talent from successful international companies that will really help your fintech business scale-up, there are many problems.

Attracting top business talent when you are a small and unknown business is not easy. So, ensuring your business is in the best possible position to scale and grow quickly is essential in this crucial war for talent facing London’s numerous fintech businesses. For instance, your business plan needs to be believable and have strong supporting research and analysis, and it must prove scalability for top level talent to be interested.

At our central London accountancy practice, Wilson Wright works with many fintech businesses to help them develop robust business plans that will help them successfully achieve rapid growth, and consequently be attractive to the talent they need.

Typically, one of the most frequent problems we come across is businesses having too little capital when they start looking for senior hires.

Too little capital = too much risk

The problem with being under-capitalised is twin-fold. Firstly, it creates the impression that your business is not serious and will quickly become resource-constrained… joining such a business is hardly an attractive proposition for someone with a secure and highly paid job who is also being courted by several ambitious tech businesses.

Putting aside the business risk, it also means the financial package your firm offers will involve too much financial risk for them… few are going to want to join a firm when their share options and other parts of the financial package could be diluted by the need for future investment.

So how should an ambitious early-stage fintech business go about ensuring it is well capitalised ahead of recruiting the talent needed to scale up?

Using the Enterprise Investment Scheme (EIS) to capitalise your business

Ensuring the business is adequately capitalised is essential for being attractive to top talent.  While there are numerous options, our experience of working with dozens of such tech businesses is that usually the best approach in the early rounds is to utilise the UK government’s Enterprise Investment Scheme.

The EIS is a scheme created specifically for smaller, higher-risk companies to help them quickly and efficiently raise finance by offering a range of tax reliefs to investors who purchase new shares.

We work with tech businesses to help them successfully use the EIS to raise money from private investors and HNW individuals.

By way of example, we recently worked with a fintech business with innovative technology.  There was a significant market opportunity but funding was crucial to the opportunity being exploited.

The company had previously been denied EIS clearance by HMRC. Upon being engaged we re-submitted an application, making full disclosure and within 6 weeks had received clearance.

The company was quickly able to raise the first-round finance and attract the key people it needed, in this case a CEO and Chairman with experience in running similar companies.

The company has since launched and closed a crowdfunding round and was oversubscribed within two weeks. It has reached break-even and is now growing its revenue at a rapid rate.

Sign up for future blogs and dinners for fintech CEOs and founders

In future blogs I’ll be looking at the other building blocks for attracting the sort of top talent that will really help you successful scale up your fintech business, including ensuring the right package for your top talent (and why we endorse the EMI share options scheme), the key role of the chairman in attracting top people and, really importantly, what top recruits are looking for when they analyse your business case.

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  • We also have regular discussion dinners in central London for fintech business CEOs where you can privately discuss your biggest business challenges.  For full details, click here

Discussion dinners for tech CEOs & founders: new London dates unveiled

Tech CEOs: overcoming your biggest dilemmas

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Property bodies call upon Chancellor to consider SDLT reforms in Spring Budget

With the Spring Budget just around the corner, property bodies are calling upon Chancellor Philip Hammond to consider reforms to Stamp Duty Land Tax (SDLT). Read More

Small businesses urged to seek advice ahead of Making Tax Digital

Small and start-up businesses are being urged to seek specialist advice, after HM Revenue & Customs (HMRC) confirmed that its Making Tax Digital (MTD) project will go ahead as planned. Read More

CIOT responds to Making Tax Digital plans

The Chartered Institute of Taxation (CIOT) has welcomed the fact that HMRC has rowed back on some aspects of its flagship Making Tax Digital initiative, but has warned that the timetable for implementing the scheme is still “daunting.”

The organisation was responding after the tax authority set out further details for how the new regime will work in practice.

Following a consultation last year, officials have agreed that businesses will be allowed to continue to use spreadsheets for record keeping and confirmed that no penalties will be issued for late submissions in the first year of the initiative.

Despite the concessions, the institute remains convinced that HMRC should push back the start date for the new arrangements.

At present, pilots are intended to start in April and the scheme scheduled to begin in earnest next year.

Bill Dodwell, the CIOT’s president, said: “Businesses and tax professionals across the UK will be poring over today’s announcements to see what they mean for them and their clients and customers. The fact that there were more than 3,000 submissions to these consultations shows the level of concern about the proposals and the impact they will have.

“The promised software isn’t yet available for anyone to see its capabilities, or know how many providers of free software will actually deliver in the envisaged timeframe.  There is also no ability yet for agent access. All of these things make the case for delay even stronger.”

Concern about the impact of digital tax plan on small businesses

Small business experts have warned that plans to digitise the tax system will place a significant burden on Britain’s SMEs. Read More

Government policy and rising property taxes ‘could damage’ UK economy, say housebuilders

Property developer Berkeley Group has warned that Stamp Duty Land Tax (SDLT) and Government housing policy in the City of London could be detrimental to Britain’s wider economy.

The news comes after Berkeley Group chief executive, Tony Pidgley, suggested that transaction taxes were “too high” and having a negative effect on the UK property market.

“Transaction taxes are now too high and this is restricting both mobility in the second-hand market and the pace of supply and delivery of new homes in London and the South East,” he said.

“Government policy, which has been helpful outside London, has had a negative effect on the capital.

“There is also a tension between the national policy on Starter Homes and the London Mayor’s ambition to build more affordable housing, while the very high rates of the Community Infrastructure Levy adopted by local authorities now pose a significant threat to development viability,” he added.

Mr Pidgley said that a lack of new housing had ‘stoked’ property prices and left City of London homes unaffordable, despite increasing demand.

Property developer Redrow shared a similar sentiment regarding increasing property taxes. It suggested that the introduction of a three per cent SDLT surcharge designed to deter investors was responsible for a ‘slowdown’ in City activity.

Redrow chairman Steve Morgan, said: “Activity in this section of the market remains sluggish; however, Redrow’s exposure is very limited and all other areas in which we operate, including Outer London, have shown strong growth”.

Trade body keen to raise awareness of EIS

The Enterprise Investment Scheme Association (EISA) has launched a fresh drive to improve awareness of the EIS. Read More

Understanding the rules of EMIs

Enterprise Management Incentives (EMIs) allow a company to grant members of staff shares at a pre-determined price. Read More

SDLT surcharge support on the rise amidst housing shortage fears, says study

Almost half of UK adults support the Government’s three per cent Stamp Duty Land Tax (SDLT) surcharge on second homes, according to a new study.

The news comes following data published by the HomeOwners Alliance, which found that 47 per cent of Britons felt that the introduction of the surcharge in April 2016 represented a positive change for the housing market, whereas just 18 per cent said that they opposed the charge.

The remaining 38 per cent told the HomeOwners Alliance’s 2016 Homeowner Survey that they were either ‘neutral’ or ‘unsure’ about SDLT hikes.

Furthermore, the study revealed a rise in the number of Britons sporting ‘home ownership dreams’, with the number of UK adults aspiring to own their own home rising to 73 per cent in 2016, up from just 64 per cent recorded four years previous.

However, 78 per cent of participants added that they thought ‘housing availability’ was becoming an increasing problem, up from 72 per cent last year.

Paula Higgins, Chief Executive of the HomeOwners Alliance, said: “Despite a blizzard of Government initiatives aimed at helping homeowners, the housing crisis is deepening across the country, with ever more non-homeowners wanting their own home and ever greater concern about the lack of housing.

“Many Government policies have boosted demand for homes, but what this survey shows is that the real problem is the desperate shortage of houses.

“Until the Government tackles the fundamental issue that we just don’t have enough good quality homes, the housing crisis will continue to deepen and a generation will continue to have their dreams of homeownership crushed.”

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