YOU CAN’T please all of the people all of the time, particularly if you’re the chancellor of the Exchequer. Even if George Osborne had promised last Wednesday to personally traipse the length and breadth of the country handing out free candyfloss, an obesity pressure group of some sort would have released a statement condemning him. So putting aside vested interests and political posturing in all its forms (including from the chancellor), 2014 should go down as a year in which a pretty decent budget was delivered. And this includes for entrepreneurs.
Osborne’s radical pension reforms were more than just a rabbit out of the hat – he was concealing an elephant. Although this won’t benefit entrepreneurs in a profound way, it’s part of a commendable broader theme of trying to channel money into investing in British businesses.
Consider the merging of cash and shares Isas, and raising their cap to £15,000. Isa funds aren’t just invested in big corporates, but can also be put into companies listed on the Alternative Investment Market – exactly the sort of entrepreneurial businesses that need money to grow. Osborne also announced that peer-to-peer lending will be covered by the Isa tax umbrella, which, if it catches on, could provide much-needed funding for startups and small businesses.
The Annual Investment Allowance – which was due to fall back to £25,000 in December – will double to £500,000 from April 2014 until the end of 2015. This tax break on qualifying plant and machinery will be particularly welcome for entrepreneurs in the often neglected manufacturing and agriculture sectors. Osborne’s new direction on energy policy – which aims to undo the appalling damage inflicted on energy-intensive businesses in recent years – is the right sort of U-turn. As exciting as Tech City is, it looks like the government is finally waking up to the fact that entrepreneurs don’t exclusively hang out in Shoreditch’s tech cluster.
Since 2012, the Seed Enterprise Investment Scheme (SEIS) has been delivering 50 per cent tax relief to investors in smaller companies. The chancellor announced that SEIS is now permanent – well, as permanent as anything can be in politics – which is exactly the right message to be sending to Britain’s entrepreneurs. It would be nice to see all major parties commit to keeping SEIS in place (and more importantly, the Enterprise Investment Scheme).
Doubling lending for export finance to £3bn, while cutting interest rates by one third and raising the rate of the R&D tax credit payable for fast growing SMEs from 11 per cent to 14.5 per cent, also won’t do any harm (except to the government’s finances). Other positive moves for entrepreneurs include the promise to explore options for venture capital reliefs to apply where investments are in the form of convertible loans, and the confirmation that investors can subscribe for VCT shares via nominees.
Removing under-21s from employer national insurance contributions – vis-a-vis the tax on jobs – is the right thing to do, although many were hoping and expecting something a little more radical on this front. The impact of this tax on micro-businesses is severe, and given that it’s nothing like insurance and everything like a tax, there are strong arguments for an overhaul.
Despite the abundant candyfloss, it would have been nice to see some beef for entrepreneurs to get their teeth into. But alas, there was no truly innovative policy that acknowledges the public good served by everyone who puts their livelihood on the line to make us all richer and happier.
One reform that would have enthused entrepreneurs up and down the country would have been the extension of Entrepreneurs’ Relief, as proposed by Tim Hames of the BVCA. Specifically, the chancellor should have taken the opportunity to reduce the 5 per cent equity stakeholding requirement and increase the £10m cap at which entrepreneurs pay 10 per cent capital gains tax to £100m, or even better, scrap it all together.
Philip Salter is director of The Entrepreneurs Network.