Boost for budding entrepreneurs as investment schemes extended

The UK government has extended the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) scheme until 2035, boosting support for start-ups with tax relief for investors. Entrepreneurs are encouraged to consider legal, financial, and operational factors, such as business structure, leases, and employment contracts, to ensure successful foundations.

The government is extending two investment schemes that it says could help thousands of entrepreneurs and start-up businesses to thrive and grow. The Enterprise Investment Scheme (EIS) and the Venture Capital Trust (VCT) scheme were both set to end on 6 April 2025 and have now been extended by ten years to 5 April 2035. The schemes are designed to encourage investment into new or young companies through tax-relief incentives, encouraging innovation, creating jobs and stimulating economic growth.

Both schemes offer incentives to investors of up to 30% upfront income tax relief and an exemption from capital gains tax on any profits made after the sale of shares. The EIS, introduced in 1994, offers tax relief to individuals that invest in new shares in qualifying companies with investors able to invest up to £1 million, or £2 million if the shares are in knowledge-intensive companies, which focus on research and development.

It’s good to see the government encouraging new businesses. However, there are several key issues that budding entrepreneurs should consider.

Key considerations when setting up a new business

There are several legal, financial, and practical factors to consider, particularly regarding commercial property leases, employment contracts, and other essential matters. Here's a guide to some of the most important aspects to keep in mind.

Choosing the Right Business Structure

One of the first decisions you'll need to make when setting up a business in the UK is choosing the right legal structure. The most common options include:

Sole trader: You run the business as an individual and are personally responsible for any debts.
Partnership: If you plan to start the business with someone else, you can share responsibility and profits through a partnership.
Limited company: A limited company is a separate legal entity, meaning the business is responsible for its debts, not the owners or shareholders. This is a popular option because of limited liability protection.

Each structure has different tax obligations, legal responsibilities, and implications for financial risk. It's important to seek legal advice and consider which structure best suits your business.

Understanding Commercial Property Leases

If your business needs physical premises, you'll probably need to enter into a lease for commercial property. Commercial leases in the UK can be complex, so it's crucial to understand the terms before signing.

Lease length: Leases typically last several years, so ensure you're comfortable with the length. Some leases include break clauses, allowing you to exit the lease early if needed.
Rent: Negotiate rent terms carefully, including any provisions for rent reviews. Commercial rent can change over time, usually in line with market conditions.
Repairs and maintenance: In many cases, the tenant is responsible for maintaining the property. Check what you’ll be expected to cover, as repairs can become costly.
Legal advice: It's strongly recommended to consult a solicitor who specialises in commercial property to ensure you fully understand the terms of the lease.

Employment Contracts for Staff

If your business plans to employ staff, you must comply with employment law, which requires that employees have a legally binding employment contract. The contract should include:

Job role and responsibilities: Clearly define the employee’s duties to avoid confusion.
Working hours: State the expected working hours and whether the employee will work part-time, full-time, or on a flexible basis.
Pay and benefits: Outline the employee's salary, any bonuses, pensions, or other benefits. In the UK, you must pay at least the National Minimum Wage.
Holiday and sick leave: Ensure that the contract meets statutory requirements for holiday entitlement and sick leave.

Employers also need to consider workplace health and safety regulations, employee rights such as parental leave, and the legal obligation to provide a workplace pension.

Starting a business in the UK involves careful planning and an understanding of legal obligations. From choosing the right business structure to securing a commercial lease and complying with employment laws, each step is vital to your success.

Please contact us if you would like more information about the issues raised in this article or any aspect of setting up a new business on 020 8290 0333 or email info@judge-priestley.co.uk

For further information on our services for start-ups, please click here.