Tax changes to encourage business? - Mazars - United Kingdom
Tax changes to encourage business?
The government is looking to businesses to spearhead the recovery from recession. Details are announced in the Finance Bill today of tax changes aimed at businesses of all sizes. Some provide tax incentives to invest in companies, others to attract mobile international businesses to locate in the UK (and indeed for UK multinationals to retain their headquarters here).
06/12/2011
The measures announced will help - but perhaps not as much as hoped. Take the new tax relief announced by the Chancellor last week: the seed enterprise investment scheme. The idea is that individuals who have no existing connection with a company can invest up to £100,000 in start up companies and HMRC will return half of the amount invested them. The practical use of this new incentive is likely to be limited due to a severe restriction to the companies that can participate. The company must be less than two years old when it issues shares to the investor. Nevertheless, this is still a helpful move for start-ups struggling to raise finance through other means, especially when bank funding it difficult to access.
Administration aspects of enterprise investment scheme and venture capital trusts are being streamlined and they are also being given “better focus” – for which read narrowing in scope. The maximum amount that can be invested each year under the schemes is being increased, but there may be fewer opportunities to invest.
The UK is now a much more attractive regime for large businesses. There is already an exemption from tax on most dividend income and many gains on the sale of trading subsidiaries are tax exempt.
However, a main bugbear for multinational businesses over recent times has been the UK’s creaking controlled foreign companies (‘CFC’) rules which have failed to keep pace with changes in international business practices. The new proposals for the CFC rules run to 60 pages of detailed legislation. Our first impression is that many companies with foreign subsidiaries will not suffer a UK CFC charge, but could have a lot of work to do to prove it. Lots of smaller companies will benefit as trading companies with profits of up to £500,000 will all be excluded, subject to certain conditions.
Profits from exploiting patents will be taxed at a lower rate. The proposed calculations of the amount of profits that will be taxed at 10% are much simpler and more beneficial than had previously been proposed, so it is heartening than the consultation process has resulted in change for the better.
There was an earlier suggestion of abolition of the UK’s tax relief for the cost of removing contamination from land caused by previous owners or occupiers, the land remediation relief. We are pleased that this has not been mentioned and so tis incentive to bring land and buildings back into use is to stay.
The changes will help is a small way, perhaps as much as could be expected in the financial climate.
We will be working with businesses to make the most of the new opportunities. For more information contact Tim Davies .
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