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What This Budget Will Do For SMEs

The 2014 budget has done much to help individuals – from alleviating the effects of tax, allowing easier saving, and cutting duty on beer and bingo. Chancellor George Osborne promised a “Budget for Business” this year, and with 400,000 more businesses in the UK compared with 2010, Government have made a number of changes to help entrepreneurs get ahead and create more jobs:

Image Credit: Startups.co.uk

Image Credit: Startups.co.uk

  • Cutting corporation tax
  • Cutting jobs tax by £2,000
  • Setting a 30% income tax relief for Social Investment Tax Relief
  • Doubling small business rate relief
  • Cancellation of September 2014’s planned fuel duty rise
  • Investing in infrastructure – better roads, rail and broadband

So the question on many entrepreneurs’ minds is this: “How else does the Budget 2014 help me?” We have done the hard work on your behalf, and isolated the points that could directly affect small businesses.

 

Do you need help with Access to Funding?

The plan
Launched in April 2012, the Seed Enterprise Investment Scheme (SEIS) was due to expire in 2017. Government has extended SEIS and made the scheme permanent.

The benefit to you
A great tool for small businesses seeking investment, these reliefs will help to ensure venture capitalists and new investors continue to back small businesses. They can now commit up to £150,000 in a single company, and in return receive tax relief of 50 percent on their income tax for the year in which they have made the investment.

The Government goal
Start-ups and small businesses continue to be extremely important to the economic recovery of the UK. SEIS helps these vital companies survive, closing the ‘equity gap’ that is caused as venture capitalists prefer to invest in larger scale projects because of the high transaction costs involved.

<strong”>What about help with Alternative Finance?</strong”>

The plan
While the Chancellor didn’t mention it in his Budget speech, Government will launch a consultation to match start-ups with alternative lenders if they’re been turned down for a traditional loan.

The benefit to you
For those struggling to access the funds they need to begin trading, gaining the information you need to source an investor, can be the difference between start up or bust.

Damian Baetens, Business Development Director at Transmit Start Ups, said: “We get a lot of people coming to us who can’t get start up finance through the traditional routes and we help them take the first steps. Once they’re established we can forward them to other people who can help them grow further so these progression routes are important for the economy”

Marc Glazer, CEO at Boost Capital, said: “Alternative lenders who often use different criteria to judge whether to lend to a business offer an important option for UK businesses with strong ambition to grow.”

The Government goal
Encouraging “better banking for business” Government will not only enable start ups and small businesses an easy route to financing their businesses, they will also develop better bonds between the banking industry and business.

Do you need help with Research and Development (R&D)?

The plan
Helping to support rising entrepreneurs and early stage companies to invest in R&D, the R&D tax credit payable to loss making small and medium-sized companies will be raised from 11% to 14.5% from April 2014.

The benefit to you
Research and development can be key to giving your product the competitive edge. This rise in R&D credit means that if your business is loss making you can claim just over £32 (instead of £24) for every £100 spent.

Carol Johnson, Tax Director in the Innovations Reliefs and Incentives Group at KPMG in the UK, said: “This is a very welcome boost to innovative start-up companies, many of which are loss-making as they establish themselves”.

The Government goal
Over the next five years, this increase should support £1.3 billion of investment in innovation.

Do you need Help With Manufacturing?

The plan
With UK manufacturers producing more than half of the UK’s exports, the Chancellor will invest a £7 billion package to cut their energy bills. The Carbon Price Support rate will be capped at £18 per tonne of CO2 from 2016-2017 and for the rest of the decade.

For renewable electricity projects and small scale generation, compensation for the green Renewable Obligation and Feed-In tariffs worth almost £1bn will be introduced, and an existing tax compensation scheme for heavy industry will be extended until 2019-2020.

The benefit for you
Offering distinct savings for manufacturers, these measures will also give greater clarity for their energy bills until 2020.

The Government goal
Supporting Government’s plans to increase exports, this investment also serves to tackle the issue of climate change.

Gareth Stace, head of climate and environment policy at EEF, said: “This sends a clear signal that government recognises the serious competitiveness issues at stake from rising energy prices.”

Do you need Help Expanding Overseas?

The plan
With Britain lagging behind on exports, this year’s budget provides increased access to finance, with plans to overhaul the UK Export Finance (UKEF) direct lending programme by doubling the loans available to foreign buyers from 1.5 billion to £3 billion and by reducing the interest rates on those loans to their lowest permitted levels.

The benefit for you
Providing this more competitive financing should help UK companies to win international contracts and expand overseas.

The Government goal
Government wants UK exports to reach £1 trillion, and for 100,000 more UK companies to be exporting, all by 2020.

George Osborne said: “We need our businesses to export more, build more, invest more and manufacture more.”

Do you need Help Employing Young People?

The plan
As well as stopping the requirement for National Insurance Contributions (NICs) for under 21s, Government also plans to build on the growth of its Apprenticeship Grants for Employers (AGE) scheme by giving extra funding of £85m in both 2014-2015 and 2015-16, providing over 100,000 additional apprenticeship programmes to business owners.

The benefit to you
Making it more cost effective for you to employ young people, this extension to AGE means that, if your business hasn’t had an apprentice in the last 12 months, you can access a £1,500 grant for each of up to ten apprentices aged between 16 and 24 that are taken on.

Brandan Flattery, CEO of Sage, commented: “It is only right the future entrepreneurs and business leaders of our country are given every opportunity to get an early foot onto the career ladder and today’s announcement should help them achieve it.”

The Government goal
With Sage research showing that less than one in five small businesses employs an apprentice, youth unemployment continues to be a problem.

Additional funding and the extension of the AGE scheme will make it easier for small businesses to employ young people, keeping industry fresh and getting more young people into professions.

A Budget To Build Business On – Thoughts From The Formations Company

Putting entrepreneurs into a more promising position as they look to form new companies the 2014 Budget has put more measures, schemes and relief in place to help small businesses to start up and grow, and to aid the economic recovery of the UK in these continued challenging times.