The Chancellor’s Budget announcement on 22 June provided some good news for small and mid-cap quoted companies, but could have gone further to encourage more investment into the sector. The highlights from the Budget include:
Capital Gains Tax
As expected, it has risen, but not to the levels that everyone was anticipating. Also, the 18% capital gains tax (CGT) rate still applies for employee shareholders not on higher rate and the annual CGT exemption has survived intact for all taxpayers.
In relation to this, entrepreneurs’ relief (10% rate) is being extended to the first £5m of lifetime gains for qualifying disposals, but this only applies if strict conditions (e.g. shareholders having at least 5% of voting rights and ordinary share capital) are satisfied. We are encouraging the Government to look at extending the 10% rate to employee shareholdings by removing the 5% threshold.
The planned reductions in the main tax rate from 28% to 24% over 4 years and the small companies’ rate to 20% from April 2011 are clearly welcomed.
Tax Simplification and Regulatory Burden
The Government announced it will be setting out a more detailed programme for reform to the taxation system in the autumn and will be reviewing the regulatory burden in the UK.
Green Paper on Business Finance
There will be a green paper on business finance published before Parliament’s summer recess. It will look at a broad range of finance options, including equity, and will invite comment from interested parties on ways to enhance access to finance.
In the run up to the Budget, the QCA met with the Secretary to the Exchequer, David Gauke MP, in which we set out our proposals for the small and mid-cap quoted sector. We would encourage members to continue lobbying for less regulation through industry and other channels, emphasising that the burden of regulation is disproportionately higher for small and mid-cap quoted companies. If you’d like to see the QCA’s representations on this area, please click here.