WHAT will the Budget offer start-ups? It’s a broad question, since they’re influenced by the same policy levers used to incentivise employees or larger firms. Some entrepreneurs set up as sole traders, for example, meaning they pay income rather than corporation tax. The expected increase in the personal allowance to £9,440 will catch many boats in its rising tide.
More specifically, however, the much-vaunted (but widely ignored) Seed Enterprise Investment Scheme could be extended. It allows investment of up to £100,000 in the shares of relevant firms, and provides 50 per cent tax relief on income. In addition, investors get a capital gains tax exemption on any gains.
But what else could appear? Richard Mannion, national tax director at Smith & Williamson, points out some less obvious measures. The creative sector is likely to get a boost. “Draft legislation in December outlined a new relief for TV, animation and video games production, with up to 100 per cent enhanced deduction from corporation tax for qualifying costs,” he says. If you work in the sector, keep an eye out on Wednesday for any developments in the area.
Further, the patent box scheme is being phased in from April. A reduced corporation tax rate of 10 per cent will be introduced for qualifying patent income. And there are likely to be developments making it easier for privately-owned companies to introduce share incentive arrangements for employees. There has been confusion in this area – this is not the same scheme that could allow firms to reduce employment rights in return for share incentives. But bear it in mind.
Most interesting for smaller, productive companies, however, could be what the chancellor plans to do to tackle the sclerotic, zombies clogging up banks’ lending books. According to Christine Elliott of the Institute for Turnaround, a taskforce may be set up to help banks review and wind down struggling businesses more rapidly. With access to finance still a problem for excellent firms, borrowing could be made slightly easier.
Tom Welsh is business features editor at City A.M. @TWWelsh