Business leaders are disappointed that this week’s mini budget did nothing to resolve the problem companies have borrowing to expand.
Although Chancellor George Osborne agreed to review business rates and doubled small business rates relief giving high street shops, pubs and cafes a £1,500 discount on their rates, little was done to expand the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) or Venture Capital Trusts (VCT).
In his Autumn Statement 2014, Osborne told MPs that a new online portal for managing SEIS, EIS and social investment tax reliefs (SITR) will be ready in 2016 – and a similar portal for VCTS would follow.
However, the move is seen more as a way to ease tax avoidance monitoring of the schemes by HM Revenue & Customs (HMRC) than aid for investors or small businesses.
HMRC is rumoured to have upped scrutiny of the tax breaks, especially EIS and VCTs, after a spate of tax abuse in some high profile investments by celebrities and sports stars.
More help from SEIS
These included some EIS schemes set up to make movies, but which never made a film.
In a balancing act between funding small businesses and tackling tax avoidance, the government needs to find a happy medium that frees up investment, argues Iain Moffatt, who heads accountancy firm KPMG Enterprise.
The firm recently released a study that showed 70% of small businesses considered the government could do more to help them find funding.
“The bottom line of all the research and talks we have had with owners and managers would like to see SEIS and EIS play a wider role in financing small businesses,” he said.
“Finding money to grow a business remains a major problem and although small businesses recognise and appreciate help is out there, they feel it needs joining up and funding made easier to access.
Family affair
“Streamlining how to find the most suitable from the numerous funding schemes and incentives would be a great step forward.”
Moffatt explained one of the issues with SEIS and EIS is directors are unable to benefit from tax incentives because of a 30% cap on shareholdings.
“Many businesses who want to enter these schemes can’t because they are family owned and shareholdings by family members are aggregated and typically fail this test,” he said.
“The family self-funds the business anyway but cannot access the tax breaks that they could if they put their cash into another business unconnected with their family.”
