Tinkering Chancellor set to help entrepreneurs and business
WILL The Chancellor abolish the 50p income tax band in return for the introduction of a Mansion Tax?
Will high earners’ pension tax breaks be slashed, and will a new VAT rate be slapped on luxury items?
As speculation over George Osborne’s Budget reaches fever pitch there is, however, an overriding consensus, irrespective of political persuasion.Put simply, the March 21st Budget has to be one for growth.
The economy is depressed, with growth lower than anticipated and unemployment at levels not seen for many years.
While Government borrowing is £10bn below the official forecast it is doubtful whether he will use this this “war chest” to fund tax cuts.
Mr Osborne has stated quite clearly that any tax reductions need to be paid for by tax increases elsewhere.
So he has to find ways to stimulate the economy whilst at the same time adhering to the austerity measures designed to calm the bond markets.
As a result, many believe that the Budget on March 21 is likely to concentrate upon enhancing and clarifying existing measures to stimulate growth in the private sector.
A successful private sector creates employment and employment provides tax revenue and spending power.
Anything new announced in the Budget to help businesses and stimulate the economy must be welcomed, but it should not be overlooked that there are indeed in place already a number of measures designed to achieve this end.
The Office of Tax Simplification in a report issued in early 2011 identified some 103 reliefs then available against corporation tax.
In last year’s Budget the Chancellor announced a reduction in the corporation tax rate bringing the headline rate down to 23% from 26% by 2014 and it is possible that further reductions may be announced.
One of the greatest concerns of many small and medium businesses is the ability to raise monies to fund growth. In the 2011 autumn statement plans for a credit easing scheme were mentioned and The National Loan Guarantee Scheme is to be in place by March 21, 2012 guaranteeing funding for UK Banks if lent to small businesses. Full details are anticipated in the Budget.
The Enterprise Investment Scheme (EIS) is designed to assist smaller higher-risk trading companies to raise finance by offering to those who purchase new shares in those companies tax relief in the form of capital gains tax deferral, Income Tax relief and exemption from Inheritance Tax.
From April 6, this year, Seed Enterprise Investment Schemes (SEIS) will become available focusing upon smaller early stage trading companies.
The Government is to offer a capital gains tax holiday so that gains realised on the disposal of assets in the year 2012/2013 that are invested by individuals through SEIS in the same year will become exempt – up to an annual investment limit of £100,000.
Venture Capital Trusts also provide incentives to encourage investment in smaller higher risk trading companies in the form of income tax relief, tax free dividend income and capital gains tax exemption.
To be eligible for qualifying investment in either an EIS or VCT scheme from April 6, 2012 a company must be an unquoted trading company and must have fewer than 250 employees and gross assets of no more than £15m before the new investment. From April 6, companies will be able to raise up to £10m in any 12 month period from EIS or from VCT investments.
At Square One Law our corporate services team advise companies on the structuring and affecting of all types of private equity and venture capital transactions.
We advise on the full range of services for corporate clients who have a requirement for finance, fundraising and restructuring.
We also act for a number of high net worth individuals and syndicates looking to invest in early stage and growing companies.
Our wealth management team provides advice upon inheritance tax mitigation planning.
Stuart Hamilton
Private Client Partner
Direct dial: 0843 224 7920
Email: stuart.hamilton@squareonelaw.com