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Labour Governments have in the past been viewed
as antipathetic to enterprise. However, in recent
years they have done their best to change this
and they have introduced a number of reliefs for
entrepreneurs and also for those seeking to invest
in businesses. No serious business plan can be
prepared ignoring these reliefs.
Investors
The keystone of the Government's reliefs for investors is the Enterprise
Investment Scheme. To an extent these have been mirrored for companies
by the Corporate Venturing Scheme.
Within the Enterprise Investment
Scheme the basic tax reliefs are 20% Income Tax
relief on the amount an investor subscribes for
shares in a trading company, coupled with the potential
to defer Capital Gains Tax on other gains against
the cost of this investment. There is ultimately
also an exemption from Capital Gains Tax on the
disposal of these shares (except to the extent
for any deferred gains which become chargeable
on sale of these EIS shares).
These rules are most beneficial
where each individual investor takes up less than
30% of the share capital in the company. The rules
are complex but on the whole allow a significant
degree of tax relief or deferral on an investment.
For further advice please contact Hugh McNeill
at hugh.mcneill@tenongroup.com
Corporate Venturing Relief
This relief mirrors that of the Enterprise
Investment Scheme. It allows trading companies
who invest in another trading company (where the
holding is up to 30%) to obtain Corporation Tax
relief at 20% on the investment. There is also
a rollover relief on sale of these types of investments
into further investments of this type. Although
limited this should allow, and perhaps encourage,
joint ventures between companies, particularly
for larger companies investing in smaller companies.
Both the Corporate Venturing
Scheme and the Enterprise Investment Scheme have
limits on the size of company that qualify. For
further details please contact Hugh McNeill at hugh.mcneill@tenongroup.com
Research and Development Tax
Credits
For the inventor, or those who are able to take a good idea forward through
to a working prototype, research and development tax credits are an extremely
welcome addition to the tax reliefs available. In essence, they allow
either a repayment based on salaries and consumables expended on research
and development. The repayment can be up to 24% of the expenditure involved.
Special rules apply to subcontractors.
Again, there are limitations
on the size of the company involved but this relief
gives a very substantial cash flow advantage to
start up businesses, and can also give enhanced
tax relief at rates up to 45% on expenditure for
more established companies which are generating
profits.
New reliefs for larger companies
have just been announced by the Chancellor. Details
are to be included in the Budget.
For further details please contact
Hugh McNeill at hugh.mcneill@tenongroup.com
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