The reduction in corporation tax for larger businesses should help encourage them to remain or relocate to the UK and we can only assume that if the measures introduced in the Budget promotes inward investment in this way then it will ultimately have a knock on effect for the smaller and medium sized businesses who disappointingly were not directly assisted by tax or red tape reductions in yesterday’s speech.
Previously announced incentives to invest in Research and Development increasing the rate of relief to 225% of qualifying expenditure from April 2012 have been reconfirmed and we should look to make use of this tax credit wherever possible.
It is our view that the extension of the Enterprise Finance Guarantee which provides Government backed security for bank lending should be welcomed together with the Seed Enterprise Investment Scheme which supports new businesses whilst providing 50% (and potentially 78%) tax relief on share investment. The continuation of the Enterprise Investment Scheme relief will create attractive income tax and capital gains tax breaks for equity investors which, if the opportunity to use the relief is identified at an early stage of the investment conversations, may encourage investment into your business over another and may plug the gap left by the shortfall left by the banks following the introduction of far more stringent lending criteria.
The increases in the standard personal allowance will primarily benefit taxpayers earning less than £100,000. Individuals without personal allowances will suffer additional income tax due to the restriction in the basic rate band. The freezing of age-related allowances will come as a blow to individuals entitled to it who may have been expecting it to increase in line with inflation but this measure will save significant tax for the Exchequer.
We will continue to further consider the detail of the small print in the budget statements and will contact you personally should we identify a matter which has direct impact on you.
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Gwyn Williams and Karen Best
Directors Clay Shaw Thomas