With the Chancellor set to announce the 2013 Budget on 20 March, Debbie Griffiths, tax partner, provides her forecasts on what's likely to be included for SMEs:
It is widely expected the Chancellor will propose tightening the rules surrounding the use of limited liability partnerships (LLPs), which some unincorporated SMEs may adopt. This was trailed in the Autumn Statement last year and is anticipated to concentrate upon the use of LLPs in tax avoidance. The key areas of focus may be where LLPs are used to disguise employee relationships, and, subsequently, result in an employer's National Insurance Contribution saving. There may also be further anti-avoidance rules. The main concern here would be if such rules inadvertently caught genuine commercial LLP structures used by SMEs. While it is unclear what will be announced, this is one to watch out for, since it could mean material changes in the tax treatment of LLPs in the future. There is a view that legislation may be introduced and become effective from 2014.
Since it is unlikely further changes will be made to the annual investment allowance, entrepreneur's relief or R&D tax credits for SMEs, the main area of interest for SME financing will be the Seed Enterprise Investment Scheme. The Seed Enterprise Investment Scheme, and relevant capital gains reinvestment relief, may be extended for a further year, provided EU approvals are gained. This would be a welcome cash boost for small enterprises, particularly in the early stages, since it offers tax relief to individuals who buy shares in start-ups. This encourages investment into small enterprises that may otherwise struggle for external funding.
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