2012 Budget Round-Up

3rd April 2012

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The Chancellor's 2012 Budget was somewhat underwhelming - much of it was leaked before the event. And while it was overall business-friendly Budget, there was not much in there to get quoted companies very excited about - nothing on Stamp Duty on shares, nothing on AIM shares into ISAs and no major changes to capital gains tax reform. But there were a few announcements that may be of interest to quoted companies:

Entrepreneurs' Relief for Enterprise Management Incentives (EMI)

The Chancellor announced an extension of a capital gains tax relief (known as Entrepreneurs’ Relief) to shares acquired through an EMI Scheme and an increase in the individual limit of the value of shares subject to EMI options from £120,000 to £250,000.

These extensions will help small and mid-sized businesses be able to better incentivise their employees and directors to own shares in their companies, aiding their growth and ability to recruit and retain their staff.

The targeted extension of Entrepreneurs’ Relief was central to our Budget Proposals this year. The proposals focused on the extension of the relief to other key equity stakeholders in a business including long-term investors in SMEs, as well as pushing for Entrepreneurs’ Relief to apply from the date of grant of the an EMI option rather than from its exercise. So these EMI changes were a welcomed move and we will continue to campaign for further reform in this area.

Further reduction in the rate of Corporation Tax

The main rate of Corporation Tax will be cut to 24% for periods on or after 1 April 2012. The acceleration of cutting Corporation Tax is something that should be welcomed by business - and puts the UK on track to have a main rate of Corporation Tax of 22% by 2014.

Changes to the Enterprise Investment Scheme and Venture Capital Trusts

While announced initially in last year's Budget, the 2012 Budget confirmed the expansion of the Enterprise Investment Scheme and Venture Capital Trusts, including:

  • Increasing the number of employees from 50 to 250;
  • Increasing the annual investment limit from £2m to £5m; and
  • Increasing the gross assets test from £7m to £15m immediately before the investment (and from £8m to £16 million immediately after).

State aid approval is still needed from the EU; but, these increases are included in the Finance Bill 2012.

However, it is worth noting that the 2012 Budget has only confirmed an increase in annual investment limit to £5m - the Government originally announced that it would be increased to £10m. There is no explanation for the restriction at the moment.

If you have any other concerns or comments on the Budget, please let us know by emailing Kate Jalbert.

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