At the end of 2014, Chancellor of the Exchequer, George Osborne announced that the Government would be applying more measures to give support to small and medium sized enterprises and startups.
He announced plans to further prolong small business rate relief by an extra year, until April 2016 instead of April 2015. This doubles the usual rate of relief for ratepayers. Entrepreneurs’ tax relief is also being extended, as well as a planned increase in Research & Development tax credits for small to medium sized enterprises to 230%.
With April 2015 just around the corner, we thought it would be helpful to reassess the measures contained within the Autumn statement and set out how these measures will help UK startups.
1. Financing for startups
In his statement, Mr Osborne stated that the government would also provide an investment of £400 million (via the British Business Bank) into venture capital, which would aid startups in need of finance. He also added that support would be provided in order to help companies, whose bank applications for finance were declined, find alternative funding sources.
By permitting capital tax gains that are “eligible for Entrepreneurs’ Relief (ER) and deferred into investment under the Enterprise Investment Scheme (EIS) or Social Investment Tax Relief (SITR) to benefit from ER when the gain is realised”, it is also hoped that more investors will be encouraged to build, and help build up, entrepreneurial companies.
Ultimately investors will be given a reduced tax rate, 10%, of capital gains tax which is paid on the profit made when they sell their business, which is a huge reduction on the normal 18% or 28%.
The big difference here, to what has gone before, is that traditionally investors with other investments that qualified for EIS or SITR, were ineligible for the 10% ER rate. These plans, however, mean that even if they have EIS or SITR-qualifying investments, they will still be able to take advantage of the lower 10% tax rate.
2. Investment in big data
Big data has become quite the buzz word lately, something which the government have latched onto, first with their confirmation in March 2014 that the Alan Turing big data centre would be based in London and then with the December statement unveiling the government’s plans to inject an investment of £113 million into a Daresbury-based big data centre.
This investment is being made in order to ensure that non-computer experts in business are able to gain insight from big data so they are able to improve and design their own products and services, as well as their own manufacturing processes.
Also announced was the plan for the UK government to invest £9 million into the prize funds for London, Bristol and Coventry and Milton Keynes’ “driverless car testbeds” trials. This is an additional sum to the original £10 million that was recorded in the National Infrastructure Plan from December, 2013.
3. Support for financial and technology services
The statement also focused on the FinTech sector (a joining of financial and technology). The Chancellor stated that there would be a call for evidence on how Application Programming Interfaces (APIs) might be used in the banking sector and how support might be established to encourage Peer to Peer (P2P) and crowdfunding platforms.
An additional measure includes bad debt relief being provided for P2P lending and a review into the regulations which are currently in place surrounding institutional lending through P2P platforms.
The additional investment that the government has planned will hopefully inject some more life in the UK startups arena, hopefully inspiring not just more entrepreneurs, but more interest and action from investors too.