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What is the 10% Crowdfunding Rule?
Crowdfunding is a way in which people and businesses (including start-ups) can try to raise money from the public, to support a business, project, campaign or individual.
https://www.youtube.com/watch?v=h-yff2Ord80
The term ‘crowdfunding’ applies to several internet-based business models, only some of which we regulate.
The Financial Conduct Authority don’t regulate:
- Donation-based crowdfunding: people give money to enterprises or organisations whose activities they want to support.
- Pre-payment or rewards-based crowdfunding: people give money in return for a reward, service or product (such as concert tickets, an innovative product, or a computer game).
The FCA do regulate:
- Loan-based crowdfunding: also known as ‘peer-to-peer lending’, this is where consumers lend money in return for interest payments and a repayment of capital over time.
- Investment-based crowdfunding: consumers invest directly or indirectly in new or established businesses by buying investments such as shares or debentures.
Further details on their website
The Financial Conduct Authority is proposing that starting from this year inexperienced investors in equity schemes will have to certify that they will not invest more than 10% of their portfolio in unlisted businesses.
Firms that run the website platforms say the rules are too tight and will put off potential investors.
Barry James, founder of The Crowdfunding Centre, says: “Make no mistake, the infamous 10% rule – however it’s dressed up – does just that: it takes the crowd out of equity crowdfunding.”
Despite the crackdown, investors who lend to small companies will not be covered by the Financial Services Compensation Scheme which protects investors if they are mis-sold an investment or if the company they invest in goes into liquidation.
The FCA believe there is high risk that consumers could suffer losses from peer-to-peer lending.
Is the risk too high? would you invest?
steve@bicknells.net
HMRC demand payment from Landlords
HMRC launched the ‘Let Property Campaign‘ on the 10th December 2013.
If you’re a landlord who has undisclosed income you must tell HMRC about any unpaid tax now. You will then have 3 months to calculate and pay what you owe.
The Let Property Campaign is an opportunity open to all residential property landlords with undisclosed taxes. This includes:
- those that have multiple properties
- landlords with single rentals
- specialist landlords with student or workforce rentals
- holiday lettings
- anyone renting out a room in their main home for more than £4,250 per year, or £2,125 if the property was let jointly, but has not told HMRC about this income
- those who live abroad or intend to live abroad for more than 6 months and rent out a property in the UK as you may still be liable to UK taxes
According to the Telegraph….
Fewer than 500,000 taxpayers are registered with HMRC as owning properties other than their home. And yet other sources put the number of Britain’s growing army of landlords at between 1.2million and 1.4million.
Why the discrepancy? No one can say for sure, but the taxman has his answer: not enough people are declaring – and paying tax on – their property incomes and gains.
HMRC will identify those who they believe should have made a disclosure by:
- comparing the information already in their possession with customers’ UK tax histories
- continuing to use their powers to obtain further detailed information about payments made to and from landlords
Where additional taxes are due HMRC will usually charge higher penalties than those available under the Let Property Campaign. The penalties could be up to 100% of the unpaid liabilities, or up to 200% for offshore related income.
If you owe tax, you must tell HMRC of your intention to make a disclosure. You need to do this as soon as you become aware that you owe tax on your letting income.
At this stage, you only need to tell HMRC that you will be making a disclosure.
You do not need to provide any details of the undisclosed income or the tax you believe you owe.
steve@bicknells.net
Buy to Let is Back!
House prices are rising as confirmed by the Land Registry in their report 29 April 2013, the annual change is 0.9%, rent is increasing again after a drop in 2009 according to the English Housing Survey, in 2011 it went up 3% to a mean rent after housing benefit of £132 per week. So let’s see who the tenants are (English Housing Survey 2011):
| social and private renting households receiving Housing Benefit | ||||
| all social renters |
all private renters |
all renters |
||
| percentages | ||||
| age of household reference person | ||||
| 16 to 24 | 6.3 | 11.9 | 7.8 | |
| 25 to 34 | 12.6 | 26.9 | 16.5 | |
| 35 to 44 | 18.1 | 24.0 | 19.7 | |
| 45 to 54 | 16.3 | 15.8 | 16.2 | |
| 55 to 64 | 14.1 | 9.0 | 12.7 | |
| 65 to 74 | 15.8 | 7.8 | 13.6 | |
| 75 and over | 16.7 | 4.4 | 13.4 | |
| marital status of household reference person | ||||
| married1 | 16.9 | 18.4 | 17.3 | |
| cohabiting2 | 5.5 | 9.7 | 6.7 | |
| single | 33.2 | 37.6 | 34.4 | |
| widowed3 | 17.1 | 7.5 | 14.5 | |
| divorced4 | 20.9 | 17.0 | 19.8 | |
| separated5 | 6.4 | 9.9 | 7.3 | |
| household size | ||||
| one | 50.5 | 31.7 | 45.4 | |
| two | 23.2 | 28.7 | 24.7 | |
| three | 11.5 | 18.0 | 13.3 | |
| four | 8.2 | 12.3 | 9.3 | |
| five | 3.6 | 5.8 | 4.2 | |
| six or more | 3.0 | 3.4 | 3.1 | |
| household type | ||||
| couple, no dependent child(ren) | 11.5 | 8.0 | 10.5 | |
| couple with dependent child(ren) | 10.1 | 19.2 | 12.5 | |
| lone parent with dependent child(ren) | 20.9 | 35.1 | 24.7 | |
| other multi-person household | 7.1 | 6.0 | 6.8 | |
| one person | 50.5 | 31.7 | 45.4 | |
| length of residence | ||||
| less than 1 year | 8.4 | 27.7 | 13.6 | |
| 1 year, under 3 years | 15.4 | 32.5 | 20.0 | |
| 3 years, under 5 years | 13.2 | 15.5 | 13.8 | |
| 5 years, under 10 years | 20.7 | 12.3 | 18.4 | |
| 10 years, under 20 years | 22.2 | 8.0 | 18.4 | |
| 20 years or more | 20.1 | * | 15.7 | |
| economic activity of | ||||
| household reference person | ||||
| full time work | 2.7 | 13.1 | 5.5 | |
| part time work | 9.5 | 18.1 | 11.9 | |
| retired | 36.4 | 16.0 | 30.8 | |
| unemployed | 13.8 | 17.4 | 14.8 | |
| full time education | * | * | 1.5 | |
| other | 36.4 | 32.9 | 35.5 | |
| total | 2,395 | 890 | 3,285 | |
| £ per week | ||||
| mean gross weekly income | ||||
| of household reference person | 206 | 237 | 215 | |
| (and partner) | ||||
| sample | 1,945 | 690 | 2,635 | |
Yields are looking good, its possible to achieve 8% to 10%, take a look at the examples on http://investors.assetz.co.uk/property-listing.htm
Lending rates are low with Bank of England base rate stuck at 0.5%.
So we should see Buy to Let coming back into fashion with investors, with that in mind here are my top tips to minimise your tax:
1. Claim allowable expenses
- Mortgage or Loan Interest (but not capital)
- Repairs and maintenance (but not improvements)
- Decorating
- Gardening
- Cleaning
- Travel costs to and from your properties for lettings or meetings
- Advertising costs
- Agents fees
- Buildings and contents insurance
- Ground Rent
- Accountants Fees
- Rent insurance (if you claim the income will need to be declared)
- Legal fees relating to eviction
2. If the property is furnished claim for Wear & Tear, you can claim 10% of the rent each year
3. Claim for repair and advertising expenses incurred in getting the property ready for renting
4. Consider how the property is owned for example your partner may pay less tax or if you own it 50/50 you could use their capital gains tax exemption on sale of the property
5. Consider whether owning the property within a limited company might be better, Corporation Tax is 20% for small companies in the UK which can make dividends more tax efficient than personal income.
6. Make sure any borrowings you have are on the Buy to Let so that you can claim tax relief on the interest
7. Claim the Energy Saving allowance for energy saving work and save £1,500
steve@bicknells.net
Crowdfunding – How Social Media is helping businesses to get funding
Here are some examples:
- In 1997 British rock group, Marillion, raised £38,000 from its fans to pay for its US tour. They then went on to use the same method to fund several albums
- In 2010 Hotel Chocolat offered 3 year, FSA approved ‘chocolate bonds’ to its 100,000 tasting club members. Customers were invited to invest £2,000 for a gross annual return of 6.72%, or £4,000 for a return of 7.29% which were paid in regular deliveries of chocolate. The Bonds raised an incredible £3.7m for the company.
- In 2011 Caxtonfx (foreign exchange) raised £4m from its bond issue
- In 2012 Mr & Mrs Smith (travel website) started the process of raising £4m from a 4 year bond with cash interest of 7.5%, or 9.5% if the ‘Smith loyalty money’ option is taken
- In 2012 Pebble Technology, a Palo Alto based smart watch company used Kickstarter.com to raise $10m against forward sales of its Pebble watch
According to Simon Dixon, to be successful in crowdfunding there is a simple formula £££ = R + SC + E
Where the money raised depend on the strength of the rewards your offer (R), how much social capital you have (SC) and the emotion attached to your story (E)
Its early days, but could this be the future for some businesses, using their fans and contacts to access funding. Social Media and the internet are definitely playing a part in moving this forward.
steve@bicknells.net
Business Accountant 