Should entrepreneurs and business owners around the UK expect more from the 2011 Budget than a reduction in red tape?
It certainly ought to deliver more for the business community to justify its ‘Budget for Growth’ moniker.
The final report of the Office of Tax Simplification (OTS), which reviewed the UK’s tax reliefs and allowances, concluded that ‘whole areas of tax law are particularly complicated’ and that ‘many areas may need a more in-depth review’.
One of the central recommendations of the report is to merge national insurance contributions with income tax. But of particular interest to entrepreneurs and investors is the recommendation that conditions for investing in Enterprise Investment Schemes and Venture Capital Trusts should be standardised and simplified.
What will be interesting to see is whether EISs will be extended. At present investors in an EIS enjoy 20 per cent tax relief on up to £500,000 of investment in an approved business that has less than 50 employees and gross assets of under £7 million. Many would like to see the relief extended to those people who provide loan funding to businesses, an increasingly popular source of capital since the banks have virtually closed their doors to business funding.
But what of Entrepreneur’s Relief, which of course was never as simple in practice as it first appeared when introduced? The report echoed the sentiments of business groups that it ought to be simplified and extended to those investors holding less than five per cent of the company, currently left out in the wilds having to fork out 18 per cent capital gains tax on sale of the company.
What we would really like to see, which would get serial entrepreneurs working again, is the removal of the £5 million lifetime limit of Entrepreneur’s Relief. This would be, in effect, a move back to the very conducive incentive of business taper relief, which ended almost exactly three years ago.
Update 23rd March, 2011: Entrepreneur’s Relief to double to £10 million 
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