Budget 2012
Anthony Clarke said:
“The BBAA welcomes the announcements by the Chancellor yesterday, notably, confirming the introduction of the Seed Enterprise Investment Scheme, enabling angel investors to invest up to £100k per year in qualifying seed stage businesses and also increasing the limit of the existing EIS scheme to enable investment for individuals will be increased to £1 million and the annual investment limit for qualifying companies extended to £5 million per year. In relation to the Enterprise Management Incentives scheme we are pleased that this is more than doubling the current limit from £120,000 to £250,000, and that Entrepreneurs’ Relief at 10% can now be applied to shares acquired through the EMI scheme at a considerable saving. We are also interested to learn that the Government will consult on extending the EMI scheme to academics employed by a qualifying company, from April 2013 and BBAA will be lobbying the government to extend the EMI scheme to Angels as Non Executive Directors, as part of this scheme, to enable businesses to attract experienced angel investors onto their boards”.
Key points from the Budget as set out in a note from HMRC include:
Seed Enterprise Investment Scheme (SEIS)
– From April 2012, the Government will introduce the new Seed Enterprise Investment Scheme (SEIS), providing income tax relief of 50 per cent for individuals who invest in shares in qualifying seed companies. The Government will also offer a capital gains tax (CGT) holiday: gains realised on the disposal of assets in 2012–13 that are invested through SEIS in the same year will be exempt from CGT. (Finance Bill 2012)Please see the attached further interim guidance on Seed Enterprise Investment Scheme. which has been published today on HMRC’s website http://www.hmrc.gov.uk/seedeis/index.htm
Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)
– From April 2012 the EIS annual investment limit for individuals will be increased to £1 million. The qualifying company limits will be increased to companies with fewer than 250 employees and gross assets before investment of £15 million and a post-investment gross assets limit of £16 million, and the annual investment limit for qualifying companies will increase to £5 million under both EIS and VCTs, subject to State aid approval. (Finance Bill 2012)
– From April 2012, the Government will remove some restrictions on qualifying shares and types of investor for EIS and the £1 million limit on investment by a VCT in a single company (except for companies in a partnership or a joint venture). For both EIS and VCTs the Government will also introduce a new disqualifying purpose test to exclude companies set up for the purpose of accessing relief, exclude acquisition of shares by a qualifying company in another company and exclude investment in some Feed-in Tariff businesses. (Finance Bill 2012).
HMT is continuing to work with the European Commission to secure State aid approval for these reforms, and expects to be in a position to make an announcement on this shortly.
The Government also announced that it intends to introduce a limit on income tax relief and they have proposed that for anyone seeking to claim more than £50,000 of income tax relief, a cap on total tax relief will be set at 25% of income. HMT have confirmed that thecap will not affect tax reliefs which are already capped such as pensions and Enterprise Investment Schemes.
Other announcements that the Chancellor has made that will increase the support Government is providing to encourage growth and enterprise:
· Corporation tax: reduce the main rate by an additional 1 per cent from April 2012. The rate will therefore fall by 2 per cent from 26 per cent to 24 per cent in April 2012, to 23 per cent in April 2013 and to 22 per cent in April 2014. These reforms will make the tax system more competitive, encourage business investment and support growth.
· Enterprise Management Incentive (EMI) scheme: more than double the individual grant limit from £120,000 to £250,000, to commence at the earliest opportunity following State aid approval and provide enhanced guidance to support start-ups. Entrepreneurs’ Relief will be extended to gains on shares acquired through EMI, and the Government will consult on extending the scheme to academics employed by a qualifying company, from April 2013 subject to State aid approval. (Finance Bill 2013)
· Enterprise Finance Guarantee scheme: Government will raise the level of lenders’ Enterprise Finance Guarantee loan portfolios to which the scheme applies from 13 per cent to 20 per cent for 2012–13
· Research and Development (R&D) tax credits: As announced in Budget 2011, with effect from 1 April 2012 the rate of R&D tax credits for small and medium enterprises (SMEs) will increase from 200 per cent to 225 per cent; the limit of SME payable credit, based on their PAYE/NICs liability, will be removed; and the £10,000 minimum expenditure requirement for large companies and SMEs will be abolished. The Vaccine Research Relief for SMEs will also be removed.
· R&D tax credit: ‘Above the Line’ (ATL): From April 2013, the Government will introduce an ATL credit for R&D, with a minimum rate of 9.1 per cent before tax. Loss-making companies will be able to claim a payable credit. The Government will consult on the detailed design of the credit shortly after Budget. Final rates, including for the payable credit, will be decided following consultation.
· Enhanced Capital Allowances (ECAs) in Enterprise Zones: The Government will offer 100 per cent capital allowances on plant and machinery investment made in designated areas of the London Royal Docks Enterprise Zone, three Scottish Enterprise Zones in Irvine, Nigg and Dundee, and Deeside in North Wales. This follows announcements of ECAs in English Enterprise Zones in 2011, and in an additional zone in Humber announced in February 2012. A full list of current zones and maps will be published on the Treasury website shortly. Allowances in all zones will be available from 1 April 2012.
· Enterprise loans: Later this year the Government will pilot the best way to introduce a programme of enterprise loans to help young people set up and grow their own businesses.
· Corporation tax reliefs for the creative sector: Following consultation on the design, the Government will introduce corporation tax reliefs for the video games, animation and high-end television industries from April 2013, subject to State aid approval.
The Budget and associated documents can be found on the Treasury website: www.hm-treasury.gov.uk
