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A budget of stability and a boost for entrepreneurs?

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Thursday March 24, 2011 at 12:06pm
So claimed Chancellor George Osborne on Radio 4 this morning, and actually he might just be right.

The measures introduced to help businesses and especially small business are to be welcomed. These include the surprise increase in the Entrepreneurs Relief lifetime allowance from £5 million to £10 million. This relief was already generous in the current economic climate as it allowed entrepreneurs to pay capital gains tax at a rate of only 10% on the first £5 million of qualifying gain. With the doubling of this relief from 6 April 2011 the number of business sales wholly qualifying for Entrepreneurs Relief will undoubtedly increase, giving some welcome news for business owners who are looking to exit from their business.

As an incentive to invest in small businesses, the Chancellor announced an increase in the rate of income tax relief that would be available on qualifying investments in Enterprise Investment Schemes ("EIS"). The announcement means that the rate of income tax relief will increase from 20% - 30% from 6 April 2011, making this a very generous relief for those willing to invest in small trading companies.

The Chancellor confirmed that 21 new Enterprise Zones will be created, which is great – although Birmingham doesn’t benefit directly our neighbours in the Black Country will get the benefit of up to 100% business rate discount for up to 5 years, superfast broadband connections and enhanced capital allowances. For small businesses located outside of the new Enterprise Zones the small business rates relief holiday is to be extended for a further 12 months from 1 October 2011.

For technology companies there’s an increase relief under the Research & Development tax relief scheme, the rate for qualifying expenditure will increase to 200% from 1 April 2011 and 225% from 1 April 2012. The minimum spend criteria of £10,000 will also be removed from 1 April 2011, giving a welcome incentive for very small businesses that are investing modest amounts in R & D activity.

All in all some decent news for SMEs in the West Midlands, let’s just see how it all plays out in the weeks and months to come.

Andy Parker
Chartered Accountant Birmingham

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