The Treasury has invited comments for the 2015 Budget.  I set out below some personal thoughts on a Budget for Small Business.  There are plenty of other ideas too – but please Chancellor make the rules clear and the policies consistent over time, so that business owners can plan for the future.  Tinker Not!

  1. Make the income tax rate on small traders/1890 Partnership Act partnerships limited to 20% on trading income.  [Do not include large 20+ member partnerships nor LLP’s.  Why should Mr Patel’s corner shop be subject to a 40% marginal rate charge on trading income above ~£40k when his rivals at Tesco, Asda, etc., only pay 20% maximum rate on £millions of profit?
  1. Abolish (or severely curtail) the connected parties rule for incentives such as EIS.  The current rules are complex and arbitrary and basically mean the only individuals able to claim the reliefs are those who know nothing about the business.  This encourages excess cost and mis-selling.  If a friend or family member were encouraged to invest via a tax incentive, I believe that would provide far more intelligent seed corn funds and encourage small business.
  1. Similarly, free up personal pension funds to invest in small business.  By all means encourage diversity, but do not think restricting investments to the ‘Trust me, I’m a Big City Institution’ circle is going to improve the UK economy swiftly.  At present people are prohibited from investing part of their pension fund in a growing, local small business that they believe in and trust, and instead have to hand it over to a faceless Fund Manager (where he generates neither emotion).  This cuts down on capital available to growing entrepreneurial businesses because all pension savings are focussed on large City Institutions.
  1. Split retail and investment banking, and in exchange for Government guarantees to the former, insist on x% of lending going to small business, decided at local level.
  1. Abolish rates and have a radical review of property taxes and local Government funding.  I do not know what the answer is, but the split state of the nation between London/South East and the rest, does not bode well for everyone.

I dare say preparing a National Budget is a complex affair, requiring detailed planning, financial modelling and intellectual thought.  I strongly approve of the idea of taking sounding from our profession who deal with the consequences of tax policy on a day to day basis.  However, it is a bit scary to think that anyone seriously expects radical policy ideas raised now are actually going to feature in a June 2015 Budget!  Perhaps next time?

Compared to recent offerings, the Autumn Statement provided relatively few announcements on taxation.

Potentially the most interesting from a planning perspective is the new Seed Enterprise Investment Scheme (SEIS) which is designed to encourage investment in new start-up companies. The new scheme will provide income tax relief of 50 per cent for individuals who invest in shares in qualifying companies (limited to £100,000 per year).  This compares to 30% relief in standard EIS companies.

 There will also be a ‘capital gains tax holiday’ for investments made in the new scheme. This will provide for a CGT exemption on gains on the disposal of an asset in 2012-13 which are invested through SEIS in the same year.

 More details are likely to follow in December.