The Long-term Benefits of Government Tax Reliefs

4th March 2020

As Rishi Sunak prepares to announce his first Budget on 11th March, rumours have circulated that he plans to make changes to Entrepreneurs’ Relief. For business owners, this is a hugely important scheme when selling their firms, providing relief on capital gains tax. The relief, originally introduced in 2008, is designed to encourage subsequent investment after an exit and thus create more growth and jobs in the small business arena.

 

Entrepreneurs’ Relief is a hugely important incentive for people starting a business, which, with Brexit having been recently completed, is a consideration that cannot be overlooked. Scrapping incentives like these would be a mistake in the long term – the UK’s entrepreneurial sector is key to the UK economy and in almost all cases the tax reliefs available are more than made up for in increased revenues through job creation. 

 

After the financial crash of 2008 it was entrepreneurial spirit and ambition that turned things around to make the UK one of the world’s fintech centres; if we take opportunities and support away from those starting a business we could miss out on vital growth and innovation in the long run.

 

Though hugely significant, this scheme is not the only form of tax relief offered by the Government for the SME arena. Another important programme is the Enterprise Investment Scheme (EIS), which offers significant tax efficiencies to investors when they financially support small businesses in the UK. The primary benefit is that the EIS investor will receive income tax relief of up to 30% on the investment, alongside the ability to defer capital gains tax. Investments made through the scheme are also – after two years – exempt from inheritance tax and capital gains on any growth in value.

 

Incentives and schemes such as EIS which are operated by the Government are instrumental to the small business eco-system, and in turn the UK economy as a whole. Supporting SMEs will ultimately help to grow infrastructure across the nation, and IW Capital will continually seek to encourage this growth by connecting small firms with investors and promoting the use of EIS.

 

To find out more about IW Capital, or for more information on investment and non-executive opportunities, please speak to a member of the IW Capital team today on 020 7015 2250, or email info@iwcapital.co.uk