Should small and medium-sized businesses be happy with the 2015 Budget

The good news for all businesses is that the growth rate in 2015 is expected to exceed the predictions being 2.5 per cent instead of the predicted 2.1 per cent a year ago and the economy is expected to continue to expand by 2.3 per cent for the next three years and then 2.4 per cent in 2019. 

This puts the UK economy in a strong position for all businesses to expand and grow over the next few years so the outlook is definitely positive.

Changes to taxes have been brought in by the 2015 Budget, including changes to corporation tax and capital gains tax that will have a benefit to SMEs. The corporation tax rate has been reduced for those companies that have annual profits of 300,000 or more, to 20 per cent, down by 1 per cent, to the same rate as those that have an annual profit of less than 300,000.

Many SMEs are structured to provide the benefit of Entrepreneurs’ Relief and the new budget continues to enhance the use of this relief to allow for people with only a small indirect stake in a trading company to benefit from the relief. There are some downsides too however. Entrepreneurs’ Relief that is currently available on the disposal of personal assets will now only be available when a meaningful withdrawal from the business is made.

As widely anticipated, the chancellor has agreed to simplify the annual tax return for individuals and small businesses by introducing a new electronic system. The full details of these changes are not known as yet, but the new system is expected to be introduced throughout the next parliament.

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Another change introduced by the 2015 Budget are the alterations to the current Seed Enterprise Investment Scheme (SEIS) rules. From 6 April 2015, it will no longer be a requirement that 70 per cent of the SEIS money must be spent before EIS or VCT funding can be raised. This will make it easier for SME’s to raise additional capital when they need it.

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs). These changes will, subject to state aid clearance, require that:

  • Companies must be less than 12 years old when receiving their first EIS or VCT investment, except where the investment will lead to a substantial change in the company’s activity
  • Introduce a cap on the total investment received under the tax-advantages schemes of 15 million, increasing to 20 million for knowledge-intensive companies
  • Increase the employee limit for knowledge- intensive companies to 499 employees

Overall the chancellor introduced some positive changes to help SMEs, particularly those companies seeking to raise capital investment.

Angus Bauer is a partner at Ashfords.

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