Ask the Expert: Tax and entrepreneurs
Ashley Hollinshead, partner at Deloitte in the Midlands, discusses how the UK tax framework affects entrepreneurs.
Al answers are for general guidance only. Each case must be handled on the individual facts.
Q: Is the UK tax framework supportive of entrepreneurs, and how can entrepreneurs make more of it?
The majority of contributors to Deloitte’s Entrepreneurship UK survey for 2011/12 believe that the current taxation framework encourages and supports entrepreneurs.
The Government’s doubling of entrepreneurs’ relief to £10m in this year’s budget will have un-doubtedly contributed to the largely positive response.
Other changes, such as the scheduled rise in the rate of income tax relief available under the Enterprise Investment Scheme (from 20pc to 30pc), and the doubling of the amount of investment per company in any one tax year that can attract upfront tax relief, are also welcomed.
Where concerns remain (11% of respondents strongly disagree that the framework is supportive) these are largely related to the 50 per cent tax band and capital gains tax, both of which respondents feel could impact on the longer-term health of entrepreneurship.
With this in mind businesses need to look at what can be done to ensure they are in a position to benefit from both current and pending legislation.
One of the latter is the ‘patent box’ tax regime which is due to be introduced in 2013. Although still in development the regime proposes to tax income from patents at a reduced rate of 10% instead of a forecast headline rate of 23 per cent.
Its aim is to encourage activities that commercialise innovation within the UK, and responses from our survey indicate that entrepreneurs agree with its potential (more than 40 per cent), although 17 per cent were not yet aware of the policy.
Other specific proposals include changes to the R&D tax credit system designed to make it easier for small companies investing in new technology development to claim tax breaks.
The key opportunity for businesses and their shareholders in the current economic climate is to consider their longer term goals and to structure their businesses to meet those goals, whilst finding a balance between all taxes. The current low values of assets and the many reliefs available could be a valuable combination for those that are pro-active and start seeking advice now.
Contact details
Ashley Hollinshead
Partner, Deloitte
0121 695 5719
ajhollinshead@deloitte.co.uk
www.deloitte.co.uk
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