Innovation & Technology Conference 2016

Innovation &
Technology
Conference
April 2016

www.pkf-francisclark.co.uk
Housekeeping

Contributors

Agenda
Topic Speaker
Introductions & The Tech Business Tax Lifecycle Stuart Rogers (FC)
The Business Tax Roadmap & BEPS Katie Farley (FC)
Enterprise Investment Schemes & Investor Relief Stuart Rogers (FC)
Preparing for DD from an IP perspective Carl Steele (Ashfords)
Tour of the CALM centre
Introducing The Centre and SetSquared Robin Jackson (Exeter Innovation Centre)
Raising Money from the Crowd Sara Palmer (Crowdcude)
Business Case Study – Dashboard Simon Jones (Dashboard)

International Network
• Now PKF Francis Clark
• Effective 1 April 2016
• 400 offices
• 150 countries
• Increased depth and breadth of expertise,
skills and experience

Merger with Princecroft Willis
• 1 April 2016
• £38m combined turnover
• 59 partners
• 580 members of staff
• 8 offices

PCW
PCW
Princecroft Willis officesPCW

The Importance of Innovation
• An ‘export led recovery’ (George Osborne - 2010)
• The Dyson Report (2010)
• BIS Internationalisation of Innovative SMEs (2010)
• BIS Strategy for Growth (2011)
• 2020 Export Drive

Innovation & Tech Business Lifecycle

Katie Farley
Corporate Tax Consultant
The Business Tax Roadmap 2016

Reform since 2010
In 2010 the Corporate Tax Road Map was published with 5
principles:
• Lowering rates while maintaining the tax base
• Maintaining stability
• Maintaining a level playing field for taxpayers
• Being aligned with modern business practice
• Avoiding complexity

Reform since 2010
Corporation Tax cut
from 28% to 20%
AIA fixed at £200k
from 1 Jan 2016
Patent Box, Creative
Sector relief, R&D tax
credits
EIS, VCT, SEIS
Anti-avoidance
measures (Disguised
remuneration,
Corporate Loss
buying, Offshore
intermediaries,
Diverted Profits Tax)
OECD Base Erosion
and Profit Sharing
(BEPS)

Business Tax Road Map 2016
Sets out the government’s plans for business taxes to 2020 and
beyond. Its aims:
• Continue to reduce tax rates to drive growth, including supporting
small businesses
• Build on progress from the last parliament to tackle avoidance and
aggressive tax planning
• Simplify and modernise the tax regime

2020 and Beyond
Business Rates
• Doubling of Small Business Rate Relief from 50% to 100%.
• Rateable value ≤ £12k 100% relief
• Rateable value between £12k and £15k tapered relief
• From 2020 switch from RPI to CPI
• Business rate cut every year from 2020
• Modernisation of administration of business rates

2020 and Beyond
• Rate of CT reduced to 17% in 2010
• Lowest CT rate in G20
• Much lower than rest of G7 countries
• Loss relief changes
• Carried forward losses available for use against other income
streams and other group companies (1 April 2017)
• Restriction on amount of taxable profit that can be offset (only
applies where profits in excess of £5m) (1 April 2017)

2020 and Beyond
• Review of Substantial Shareholdings Exemption (SSE) and
Double Taxation Treaty Passport (DTTP)
• Anti-avoidance measures put in place to ensure UK withholding
taxes applied on royalty payments to non UK recipients
• Publication of tax strategy for large businesses
• New QuIP dates for large companies from 2019
• All 4 payments will be made within the 12 month accounting period
• Bringing in line with other G7 countries (and increasing cash flow
advantage for HMRC!)

Tackling International Avoidance
BEPS
• Action 1 – Digital economy
• Action 2 – Addressing hybrid
mismatches
• Action 3 – Controlled Foreign
Companies rules
• Action 4 – Interest deductibility
• Action 5 – Intellectual Property
• Action 6 & 7 – Treaty abuse and
permanent establishment
• Actions 8-10 – Transfer Pricing
guidelines
• Action 11 – Analysis of BEPS
• Action 12 – Disclosure of BEPS
• Action 13 – Country-by-country
reporting
• Action 14 – Making dispute
resolution mechanisms more
effective
• Action 15 – Developing a
multilateral instrument to modify
bilateral tax treaties

Corporate Interest Relief
Corporate interest deduction
‘Some multinational groups borrow more in the UK than they need
for their UK Activities, to fund activities in other countries which are
not taxed by the UK’
• Restriction on tax deduction available on UK interest (1 April
2017)
• Limit of CT deduction for net interest to 30% of EBITDA
• De minimis group threshold of £2m net of UK interest expense
• Threshold will exclude 95% of groups from the rules
• No longer a worldwide debt cap

OECD BEPS Project – Digital
Business
• The BEPS project was a reaction from the G20
• Large focus on ‘digital business’
• Enlarged definition of ‘permanent establishment’
• Increased emphasis on VAT and destination
principle
• Increased on emphasis on commercial and
economic substance
• Now awaiting implementation phase

Stuart Rogers
Corporate Tax Partner
Changes to EIS & SEIS

SEIS / EIS
• Tax advantaged scheme for investors
• CGT deferral
• Income tax credit
• CGT exempt on disposal
• Can be complex

SEIS / EIS Comparison
SEIS EIS
CGT deferral ‘Permanent’ Temporary
Income tax credit 50% 30%
CGT exemption Yes Yes
Maximum investment per investor £100k per annum £1m per annum
Maximum fundraise per company £150k £12m

SEIS / EIS Key Qualifying Criteria
• No investor material interest (30%)
• Limited prior connections allowed
• Must be a new(ish) trade

SEIS / EIS Key Qualifying Criteria
• Must be a qualifying trade
• Company must be independent
• Criteria must be met for follow on period of 3 years
• There are many more…

SEIS / EIS – New Trade
• SEIS requires a new trade commenced in last two
years
• EIS now requires:
- first commercial sale within seven years prior, or
- ten years if a knowledge intensive business, or
- funds raise exceed 50% of annual turnover

SEIS / EIS – Knowledge Intensive Co
• Costs of research and innovation are at least 15%
of operating costs in at least one of the previous 3
years, or at least 10% in each of the previous 3
years, and either
• The company has created or is intending to create
IP, or
• The employees with Masters or Higher Degrees
who are engaged in R&D amount to at least 20% of
the total workforce.

SEIS / EIS – Other Changes
• Limitation access to EIS for existing shareholders
• Growth & development requirement (an effective
minimum investment threshold)
• Spending of SEIS funds – 70% requirement relaxed
so SEIS and EIS can be considered together
• Renewables now fully excluded

SEIS / EIS – Admin Process
• Advance Assurance from HMRC
• EIS1 forms to HMRC
• EIS2 forms from HMRC confirm compliance
• EIS3 forms to investors

Investor Tax Relief
• Fills gap created by EC enforced restrictions to EIS
• Introduced Budget Day 16 March 2016
• A new 10% CGT rate similar to ER
• Investor cannot be a director or employee, or be
connected with one

Investor Tax Relief
• Company must be a trading company & unlisted
• Lifetime allowance of £10m
• Shares must be subscribed for post 16 March 16
• Shares must be held for three years from 6 April 16

Investor Tax Relief
• Shares can be transferred inter spouse and still
qualify
• EIS like anti avoidance measures re ‘return of value’
• Share exchanges and reconstructions should allow
holding periods to be connected

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Disclaimer & copyright

Preparing for due diligence - IP
Carl Steele

Am I investing or buying?
Am I selling?

If selling:
• What will buyer look for?
• What will happen if haven’t done
that?
• Warranties and Indemnities
• Disclosure Letter

If investing/buying:
• What should I look for?
• What should I do if they haven’t done
that?
• Warranties and Indemnities
• Disclosure Letter

• Registration of IP(barriers to entry)
• In which territories?
• Clearance/Freedom to Operate
Searches
• Licensing of IP from/to 3rd parties
• Evidence of unregistered IP –
ownership and existence
• Historic, current and potential
disputes

• Update official IP registers (change of
ownership)
• Registered Licensees
• Registered Charges
• Domain Name Ownership
• All fees paid and actions taken?
• List of renewal dates/replies to office
actions/statements of use due

• Is all (pre-incorporation) IP that
directors created now owned by the
company?
• What about IP created by 3rd party
consultants?
• Jointly created IP
• E.g. Marketing /Website
• Restrictive covenants against ex-
employees

• How is Confidential Information
protected/respected?
• Security measures/practical steps
• Employee/third party contracts (e.g.
NDAs)
• Open Source Software and licence
terms

• Assessing the quality of the
registered IP
• Are the patents/registered
designs/TMs valid?
• Are they wide enough in scope?
• Are trusted third party IP advisers
used/retained?
• Monitoring competitors

BREAK & TOUR

Introduction to
SETsquared
Dr Robin Jackson, Director, Innovation Centre
& Exeter Science Park Centre

A single multi-University Business Incubator:
Based on a 13-year partnership of 5 research-intensive
HEI’s with a commitment to innovation & entrepreneurship
Integrated activities for:
• Business Acceleration
• Research Commercialisation &
• Student>Graduate Enterprise
What is SETsquared?

Southampton win Enactus World Cup BluPoint presents at
Pitch@Palace
UK Govt. wants
more SETsquared!
Lots to Celebrate!

RevenueStage
Technology Maturity
Enterprise Networks On-Campus/Off-Campus
Investment Programme

Open Innovation ProgrammeRevenueStage
Technology Maturity
Enterprise Networks On-Campus/Off-Campus

Technology Maturity
How to work with us
Innovation, Impact and Business

Technology Maturity
W: exeter.ac.uk/business
E: RKT@exeter.ac.uk
T: 01392 723456

Technology Maturity
Events
Students
Graduates
Intellectual Property
Facilities & Equipment
Research Collaborations
Our Key Research Themes

EQUITY CROWDFUNDING
Enables everyday investors to invest alongside
professional angels and VCs, making investing in great
British businesses accessible, affordable and
rewarding.

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015
Percentage of Seed deals
crowdfunded*
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015
Percentage of Venture
deals crowdfunded*

The evolution of equity funding

250,000+Investor community
0
20,000
40,000
60,000
80,000
100,000
120,000
2011 2012 2013 2014 2015

£150 MILLION +Successfully raised
£0
£10,000,000
£20,000,000
£30,000,000
£40,000,000
£50,000,000
£60,000,000
£70,000,000
2011 2012 2013 2014 2015

£1,000,000
Largest single investment
£
£3,700,000
Biggest deal
£366,239
Average deal
£2,500
Average investment
55%
Pitch success rate
250,000
Average monthly sessions

 Simple and accessible
 24/7 Global investor reach
 Cost effective
 Marketing & media effect
 Crowd feedback and diligence
 Broad investor expertise
 High risk high reward returns
 Democratising investment
 Support friends, family & brands
 Angel investment involvement
 Diversify and spread risk
 Simple and exciting to invest
WHY?

£70,000
Annual salary
59%
Investment from high net worth &
sophisticated investors
 Technology
 Marketing
 Financial Services
 Management
Consulting
 VC and Private
Equity
TOP JOBS TOP 5
£
£
£
investor employers
WHO?

How to Pitch
THE IDEA
• What do you do and why are you are awesome?
• Clear messaging – make it easy for people to like you
• What have you achieved/done so far
• Who’s involved and why should we back them?
THE FUTURE
• What do you want and to do what?
• What could this be – market potential?
THE OFFER
• What’s in it for investors?
CALL TO ACTION!

“FAIR, CLEAR, AND NOT MISLEADING”

£5,000,000 VC +
£1,000,000 crowd

Sara Palmer
InvestmentAnalyst
sara@crowdcube.com
linkedin.com/in/sarapalmercrowdcube
@sara_Crowdcube
WWW.CROWDCUBE.COM

Exeter University Presentation
19th April 2016
1 Fredrick’s Place | London | EC2R 8AE

Industrial IoT
Measurement Transmission Analysis Monitoring
Enabling:
• Preventative maintenance
• Health & safety compliance
• Environmental monitoring

• Theft/vandalism alerts
• Accidental damage detection
• Mechanical/structural failure

Piers Corfield - CEO
Communications professional/hosted solution/mobile Architect
Phil Doherty - COO
Pharma data analyst/technical director/management
Richard Watts - CDO
Design/dashboard interface/corporate communications/brand management
Dashboard Management Experience
Simon Jones - CSO
Corporate sales/account management & customer relations
Mark Stevens - CTO
Technical architecture design, development & governance
Kevin Heng – International Operations Director
International logistics, organisation and resourcing & technical consultancy

IoT Market Metrics
Cisco predict IoT value creation to 2025 as being $17 trillion
• $2.5 trillion asset utilisation
• $2.7 trillion supply chain & logistics
90% of services revenue generated by IoT will be enterprise -
Deloitte
The pipeline leak detection market forecasts indicate a global size
of $2.5 billion by 2019 - Visiongain
Deployment of M2M devices within the Oil & Gas industry
projected to be 1.12m devices in 2018

• Pipeline Length
• Remote locations (difficult to survey/police/maintain)
• Corrosion (internal & external)
• Theft (hot-tapping, flow rate fraud etc)
• Blockage (solid obstructions/gas pockets)
• Absence of consistent grid power
• Public/staff safety
• Environmental considerations
• Damage (e.g. frost, earth tremors, accidents, vandalism, sabotage)
Oil & Gas Pipeline Challenges

• Access
• Human resources
• Technology ‘fit’
• Community
• The University
• Bowhay and ‘Big Rig’
Why Exeter and the Science Park?

Timescale Milestones and Challenges
• Dec 2015 Completion of proof of concept prototype
• Jan 2016 Second round finance (Seed Plus)
• Feb 2016 Office occupation (in addition to 2 existing
development environments)
• Feb 2016 Employee onboarding (contracts prepared)
• Q1 2016 Prototype refinement/testing
• Q1/Q2 2016 Deployment of first commercial trials
• Q2 2016 LOIs/provisional orders
• July – Dec 2016 Series A funding round

CLOSING REMARKS

Innovation & Technology Conference 2016

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