Q&A: A closer look at British tax

Sarah Malter immigrated to the UK in 2005, and in the 11 years since, she’s had a whirlwind career. In 2014, she founded Harvey to help small and medium sized companies access funding for their innovations. Since then, she’s managed to help companies claim an average or £60,000 per year of innovation.

We chatted with her about government funding for SMEs, being a founder, R&D tax credits, and even a career as a child actress.

1. You majored in genetics, psychology and astrophysics and later worked in theatre, what sparked your interest in technology?

I started out as a child actress on an American children's show. Once I got to school, however, I fell in love with science. Both of my parents were actually computer programmers, so technology was in my blood, really. I love science fiction and theoretical physics, particularly string theory and time. 

For a while I harboured a dream of being an astronaut, but once I started getting motion sickness as a teen, that was probably not a viable option. Being in technology, I get to combine many of my interests.

2. What is the most rewarding aspect of your job?

It's definitely the businesses that come back to us saying that the grants and tax credits we secured for them were a matter of survival. If we hadn't been there, they would have had to dissolve. It feels so rewarding to have a business whose goal it is to help other businesses, instead of trying to squeeze every last penny from their pockets.

It's great when you see that the work you're doing fills a genuine need. Personally though, I love getting to discover incredible new startups and spot emerging trends in various sectors. You get to meet some really interesting people with fantastic ideas, who are tangibly changing the marketplace.

3. As an American what inspired you to start a business on the minutiae of British tax?

I founded my own edtech startup in 2008, which resulted in me having to navigate a really complex UK funding system. There were so many amazing programs, but they required intricate reading of dense legalese, or the use of agencies that charged extortionate commission fees.

I knew there had to be a better way to get funding from this incentive, but one that didn't cost the Earth to leverage. Innovative British businesses shouldn't have to choose between red tape or a great financial loss. Taxes aren't tedious when you think in the long term, about the change you'll make to a company and the lives of its employees.

4. What are the risks for start-up tech companies?

There's a few, which can be grouped into the three points set out by the Rockefeller Habits: The first is cash flow. This is the most important in my view. If you run out of money, you're dead in the water. It's something that we have seen so many start ups struggle with. When you're enthusiastic about your business, it can be easy to translate that enthusiasm into financing every little idea that comes to you. It's important to rein yourself in when you find this happening—you need to make sure you do whatever you need to to keep the lights on.

Secondly, it's finding the right people people - specifically, it's less about who you hire and more about who you don't fire. Having a small team of competent people who are good culture fits, provides the business with a lot more than dozens with great CVs but who couldn't care less about who they work for. It’s about quality over quantity. When you have people who are passionate about the work they do, what they produce will be worth a lot more than the same work from people who can’t stand their job. Employees who are passionate about work are more likely to think of creative ideas and initiatives, through their love of the business and the desire to see it grow.

And third, it's about strategy and execution. You have to respond to the need of the market, not your ego. It's important to be agile and responsive, as flexibility is key to being able to adapt to an ever-changing environment.

5. There has been a lot of worry about the future of new business, what positives are there in the current climate?

There's many. We're still seeing investment in business from private investors, whether they're angel investors or VC firms. In addition, the current government initiatives are only getting more popular, growing and augmenting. SMEs are increasingly seeking funding from nontraditional routes, which catalyses the growth of things like crowdfunding and peer to peer lending initiatives.

And lastly, the weakened pound means that the possibility for overseas investment has increased as foreign investors can get more from their money.

6. What are the tax implications that start-ups should be aware of post Brexit?  

R&D tax credits have been around since the early 2000s for SMEs, and they're likely here to stay. We routinely talk to clients for whom R&D tax credits were the make or break for their company, and the government realises the importance of this scheme. In addition, there are other schemes including Video Game Tax Relief, UK Film Tax Relief, SEIS/EIS funding, Patent Box funding, Annual Investment Allowance, and Entrepreneur's Relief.

7. What do you think the government could do to simplify R&D tax credits?

It would be great to start with publicity, both about their existence about who is eligible. We often get clients who question the reality of R&D tax credits, and their eligibility for the programme, because they imagine research and development as something conducted by pharmaceutical scientists in white lab coats.

Research and development can be something as simple as developing bespoke software because the existing options were insufficient while creating a product. It's a fantastic scheme, and we want to help HMRC shout about it from the rooftops.

Image source: Shutterstock/Creativa Images

ABOUT THE AUTHOR

Desire worked at ITProPortal right at the beginning and was instrumental in turning it into the leading publication we all know and love today. He then moved on to be the Editor of TechRadarPro - a position he still holds - and has recently been reunited with ITProPortal since Future Publishing's acquisition of Net Communities.