...the famous line from the Mikado would appear to be an appropriate judgement of yesterday’s pronouncements by the Chancellor. The “twitterati” had an enraptured field day with a deafening cacophony over the Chancellor’s boost for entrepreneurial business.
The quick summary is as follows:-
- Lifetime limit for entrepreneur relief increased to £10M;
- EIS relief increased to 30%;
- Employee limit for EIS qualifying companies increased to 250;
- Gross assets increased to £15M;
- Annual investment limit increased to £10M;
- The proposed increase in the annual EIS investment limit to £1M with effect from 6 April 2012.
- Small reduction in Corporation Tax. Few outside the banking industry will be saddened by the fact that this will be funded by extension of the Bank levy;
- Increase in R&D tax credits;
- Creation of twenty one new enterprise zones in England; and
- Ongoing consultation on the proposed "patent box" legislation.
The increased limits are likely to lead to significant changes in the EIS landscape and will encourage more investment in mature businesses as well as in start-ups.
So much for the rapture, now for the modification. I did a quick "fag packet" calculation to find out how much of our turnover goes direct to Government and the result was startling. With VAT, payroll taxes (PAYE and NIC), business rates and taxation on profits no less than 40% of our turnover goes direct to Government, local and national. Many professional services providers who trade through an LLP structure will find themselves in a similar position. It is likely that this will lead to increasing debate about the merits of a corporate versus a partnership structure. Within the legal profession, the Legal Services Act is already a reality in England and will shortly become so in Scotland. It is likely that this will lead towards an increasing trend in the incorporation of legal practices and other professional services providers.