Archive for April 2012
I have to say that I was pleasantly surprised by Mr Osborne’s budget and think that it will do a lot to help boost the economy.
In all cases I think the government needs to be clear of the aims for the steps taken in the budget and make sure the right people have the right access to education around what they could mean for their business.
The elements of the budget designed to make the UK more attractive for business are definitely the good here:
* Lower corporation tax (to 24% April 2012, with a further reduction to 23% and 22% in the subsequent 2 years)
* Revision of the Controlled Foreign Companies Regulations to make it less challenging for foreign companies to set up and operate in the UK
* A change to the top rate of income tax that will be welcome news to companies looking for top talent (reduction from 50% to 45% in April 2013)
* The introduction of the Small Enterprise Investment scheme (SEIS) offering angel investors significant tax reliefs on investing in small companies, both allowing them to offset any tax they have paid through PAYE and on any capital gains they have made against their investments. This could equal a tax relief for the angel of anywhere up to 78% on these investments which is a pretty strong incentive to invest in start ups in the UK
*The increase in the personal allowance, as promised this is heading towards £10,000 and will be £9,205 by April 2013, great news for lower and middle income earners in the UK, making the UK a better place for personal wealth in some bands
The progress the government is making towards encouraging innovation is also promising:
* Enhancing allowances for R&D tax credit to 225% of qualifying expenditure, a great thing for tech start ups and other innovative companies in the form of tax relief and in some cases a cash payment for continuing investment in R&D
* The introduction of “Patent Box” which will mean a 10% rate of tax on profits relating to patents, a great incentive to work on new and interesting projects
* In the case of the EMI share option scheme, the increase in the limit per individual to £250,000 for tax advantaged share option grants thereby allowing more to be given back to employees on the scheme
* In addition, I was simply doing cartwheels when I read about the proposed extension of entrepreneur’s relief to all shares acquired through EMI, rewarding not just entrepreneurs for building great companies but their staff as well
So really the only things that I felt were bad/wonky were relatively few:
* It is great that the top rate of income tax has been targeted for decrease but is still leaves the UK income tax rate comparatively high when looking at other countries
* It was a bit of a surprise that there was no extra CGT relief in the budget which could undoubtedly be beneficial to individuals investing in private companies
* The R&D tax credit qualifying expenditure increase is fantastic but I still feel that there needs to be more education for businesses about how they apply for it. I have been through this several times now and once you know how to do it, it is relatively easy. However for small business owners the lack of knowledge around how it is done may act as a deterrent to applying
* The introduction of the General Anti Abuse Rule (GAAR) which the government has promised is designed to target the most extreme tax avoiders sounds like it could introduce a lot of additional work and red tape for companies if done the wrong way. This feels like a bit of a ‘wait and see’ as the consultation period is going to be a year. Personally I feel that it will be very difficult to distinguish careful tax planning from avoidance and may negatively impact a greater number of companies than it is designed to target
* The integration of income tax and NIC sounds like a good thing but alongside pension auto enrolment and HMRC’s real time information incentive will bring a lot of transitional headaches and work for companies on their operational payroll structure
* The tax relief for games companies (which has been long awaited) is a great thing to have been recognised by the government, however if it is based around corporation tax it won’t help the majority of start ups in this area who are not revenue or profit generating in the early phases. I do hope it will encourage the same behaviour as we have seen in places like Canada whereby larger games companies have created gaming hubs – building campuses where they co exist with universities and all sorts of other facilities to encourage creativity and innovation. I do think there is still a lot that needs to be done at the educational level in the UK to get the most from these incentives, things like improving and tailoring university courses for example
All in all, good work Mr Osborne!