Be bold and take the initiative to seek out sources of financial competitive advantage

Journalist John Burbedge meets MHA MacIntyre Hudson specialists Chris Denning and Tallat Mahmood who are advising Thames Valley tech companies to do just that.

The Thames Valley is at the heart of a vibrant UK digital tech landscape and Reading’s status as a leading UK tech cluster with a wealth of tech talent to win over the world was recently highlighted in the 2018 Tech Nation report.  But …

Corporate finance director Tallat Mahmood and corporate and international tax partner Chris Denning, part of accountant and business adviser MHA MacIntyre Hudson’s Reading-based technology team, suggest that many tech companies need to better grasp the opportunities available to them to help them grow their businesses in what could be challenging times.

In our current Brexit-bemused business world where future uncertainty is the only certainty, Denning and Mahmood advise that now is the time for tech businesses to prepare for eventualities, so they can be confident to seize post-Brexit opportunities.

Neither Mahmood nor Denning expect UK-EU business relationships to change rapidly, but both highlighted that too many UK tech companies are not fully aware of the funding and taxation opportunities and exposures relevant to their businesses.

“There’s a lot of funding out there, with many investors keen on tech, but many businesses don’t seem to understand what’s available or how to access it,” stated Mahmood.  As well as debt and equity funding, he exampled the Business Growth Fund backed by five major banks, the state-owned and SME supportive British Business Bank, various government grants and start-up loans for qualifying businesses, and ‘angel’ investment groups.

“There is definitely an education piece here for tech entrepreneurs and business-owners, plus how to sell themselves in the right way to secure the right funding,” explained Mahmood. “There is currently a commercial mismatch between what funding-seekers anticipate they can get, and what investors are prepared to offer for the lifecycle stage a business is in.”

Denning agreed, while adding: “Clearly fiscal policy can also provide a positive influence on funding. R&D credits, for example, have been around as an incentive for many years, but it still amazes me the number of tech companies that don’t claim R&D credits – cash back from the Government that could be used for funding and investment.

“As the recent Budget showed, the Government is trying to sustain and grow the UK knowledge-based economy – by doubling EIS and VCT scheme limits to incentivise investment and by lowering corporation tax from 19% to 17% from 2020 to attract businesses to the UK and encourage them to develop their IP here.”

Mahmood added: “Over past years, the UK Government has been trying to fill the tech funding gap; creation of the British Business Bank, and their recent launch of tech investment fund, British Patient Capital, is a good example. They’ve also recently invested £500 million in AI and 5G, both tech areas of great UK economic importance.

“But, there has to be some onus on businesses themselves to understand commercially what makes a good investment, and how they package and proposition themselves attractively to source funding, which is where professional business advisers can help.” 

How could the Government most help our post-Brexit tech sector?

Mahmood: “Businesses need capital to build and grow, but there are a number of options available if business owners know how to access them. The Government needs to be more vocal about the ways it is trying to help tech entrepreneurs.”

Denning. “The current concern for many businesses is regulation, red-tape and complexity.  Our tax regime should prioritise simplification of the tax code and be based on taking a longer term strategic view as to how fiscal policy can help the UK maintain and enhance its position as a global player in the technology sector. How the UK taxes the digital economy will play an important role in this regard”.

macintyrehudson.co.uk