£20bn investment for scale-ups The government is publishing its “Action Plan” to unlock £20bn of new investment in UK scale-ups. It will be achieved with a new funding injection into the British Business Bank (seeded with £2.5bn of public money), by facilitating pension fund access to long-term investments, and a doubling EIS investment limits for knowledge-intensive companies – while also aiming to ensure that EIS is not used as a shelter for low-risk capital preservation schemes. This is a bit of a mixed-bag, as Leon Ifayemi, CEO and founder of student lettings app SPCE explained. “His speech contained some policies that may hold back small businesses. “One such policy was the promised ‘crackdown on EIS as tax shelter’, which could result in many ‘lower risk’ firms becoming exempt from EIS investment – potentially overshadowing the positive announcement that the government will double the EIS limit for knowledge-intensive companies, this crackdown is a step in the wrong direction and could hinder the effectiveness of a vital investment scheme.” The chancellor also claimed the government is standing ready to step in and replace European Investment Fund lending if necessary. Corporation tax The chancellor is freezing the indexation allowance, which allows for inflation, in order to bring “the corporate system into line with personal capital gains tax”. Alex Henderson, tax partner at PwC, warned that this could be bad news for businesses in the future: “The freeze in the indexation allowance for business might seem like a technical change, but it’s raising nearly £2bn over the next five years and could have a significant impact over time. “The allowance was there for a reason: in an inflationary economy assets rise in money terms but not in real terms. The indexation allowance ensured that businesses were only taxed on the real gains they made. Over the longer term it’s a significant tax increase for business.”
Business rates From April 2018, business rates will be calculated using the Consumer Price Index, rather than the Retail Price Index, which is a different way of measuring inflation that tends to be higher. Hammond claimed this measure is worth £2.3bn to businesses over the next five years. New measures are also being put in place to alleviate the burden of businesses hit by the “staircase tax” where businesses with offices linked by communal areas are being charged higher business rates. What about Brexit? The Budget was light on details of Brexit, with Hammond simply stating: “We have already invested almost £700m in Brexit preparations. And today I am setting aside over the next two years another £3bn. And I stand ready to allocate further sums if and when needed. No one should doubt our resolve! But this Budget is about much more than Brexit.”
While the Budget has its highs and lows for businesses, many will be left scratching their heads on how to proceed with exports or other growth plans within Europe.
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