The Chancellor emphasised that enterprise was at the heart of his post Brexit strategy and announced a range of measures to stimulate business investment.
- Entrepreneurs Relief changes, notably the minimum qualifying period will be extended to 2 years from 12 months. This is particularly relevant to EMI option schemes where holders can gain favourable 10% capital gains tax treatment.
- R&D Tax relief for SME's will continue but startups will suffer some tightening up of this scheme. This will include a cap on payable credit, limiting it to 3x payroll tax normally paid by the business. We will be writing an article on this that will be published soon, so watch this space.
- The VAT threshold which was also at risk of being lowered, affecting many small businesses and start-ups, will remain unchanged.
- A new UK digital services tax on the big tech giants is being applied which will not affect tech start-ups, or small companies operating online or e commerce sites, but will be targeted on specific platform models and aimed at established tech giants generating global revenues of at least £500m pa.
- EIS funds for Knowledge Intensive Businesses are due to be launched from 2020, enabling investors to increase their level of investment under EIS tax reliefs into innovating, knowledge intensive businesses here in the UK. In case you are wondering, here is our article on knowledge intensive companies.
- EIS funds and implications. The Government has confirmed that investors in these new 'approved' funds will access similar benefits to EIS. iI will introduce a new structure with the following features: A requirement that at least 80% of funds raised must be invested in knowledge-intensive companies. The time period over which approved funds must make their investments will be extended from one year to two. Funds will be required to invest at least 50% of each raise within the first 12 months, and to keep that monies not yet invested in cash. A carry-back rule will be introduced so that investors will be able to set their relief against income tax liabilities in the year before the fund closes. 'Approved' funds will be required to submit annual statements to HMRC to demonstrate that they continue to meet the relevant conditions.
- £200m funding for the British Business Bank to back the development of VC funds is a vital measure to replace the loss of funding previously available under the European Investment Funds and which have supported up to 40% of VC funds across the UK- however only time will tell what the full impact of the loss of EIF funds will have on the growth of new VC funds. The further £115m going to extend the number of digital catapults around the UK is a valuable addition to stimulate innovation, enabling new centres in North East, Northern Ireland and South East and to support a new medicines Discovery Catapult in the North West.
- Annual investment allowance for businesses is increased from 200k to £1m for the next 2 years
- Business rates to be cut by 30% for next 2 years for all small retailers with rateable value of 51k or less
- Apprenticeships include reducing contribution of small companies to apprenticeship levy from 10% to 5%
- Employment allowance will continue for small businesses with an employer NI bill under £100k a year from April 2020.
- Personal allowance from April 2019 to £12,000 and raise the higher rate threshold to £50,000 sends an encouraging message for further spending and investment
Overall, whilst retaining the potential for the Chancellor to deliver a new budget next Spring in the light of the Brexit deal or no deal, this was a mixed bag, some encouraging measures to support business and investment. However, the cap on R&D tax credits, after a couple of years seems to have come back from the dead. There is much to be done, and still some uncertainties ahead in the post-Brexit era.