New tax break for start-up investors unveiled

Chancellor George Osborne has announced new tax relief to help encourage investment in start-up businesses.


Chancellor George Osborne announced on Tuesday a new tax relief to encourage investment in start-up businesses.

In today’s Autumn Statement, Osborne revealed that anyone investing up to £100,000 in a qualifying new start-up will be eligible for income tax relief of 50 percent, regardless of the rate at which they pay tax.

The annual investment limit for individuals will be £100,000 and companies will have a cumulative investment limit of £150,000.

The tax break will come into effect from April 2012, and is part of the government’s new Seed Enterprise Investment Scheme (SEIS).

In addition, the scheme will offer a capital gains tax exemption on gains realised in 2012 to 2013 and then invested through SEIS in the same year.

“We welcome the Chancellor’s announcement for business start-ups and look forward to the schemes getting implemented and becoming a ground reality for the hundreds of start-ups in our tech community,” said Shawn Ghosh, founder of the London Silicon Roundabout Group and CEO of TechMeetups.

Meanwhile, Osborne announced additional funding of £75 million to support technology-based SMEs in their development, demonstration and commercialising of new products and services.

The government is also keen to support innovation in larger companies with the introduction of new tax credits.

“We will introduce a new ‘above the line’ research and development tax credit in 2013 that will increase its visibility and generosity,” Osborne told the House of Commons.

This R&D tax credit was welcomed by Ernst & Young tax experts.

"This has been a real bugbear for industry and has impaired the effectiveness of the relief to date. Moving this to an "above the line" credit will mean that this will become far more effective at driving innovation. Now we wait to see the detail and, of course, the generosity of the credit," said Frank Buffone, head of R&D tax relief at Ernst & Young.

Osborne also reiterated the government’s commitment to “make it easier” for UK-based companies to compete for government procurement contracts. Cabinet Office minister Francis Maude first announced details of this strategy at a conference with government suppliers last week, which includes making the IT contracts pipeline more visible.

Two new enterprise zones – intended to attract business by having superfast broadband, simplified planning rules and tax breaks for new businesses – have also been announced, in Humber and Lancashire, taking the total to 24.

Following the chancellor’s announcement, business secretary Vince Cable said: “These measures are an important element of the government's work to create the right conditions for business to start up, invest, grow and create jobs. They sit alongside our deficit reduction plan and work to increase the supply of credit.”

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