Budget Statement 2004: Summary of Small Business Announcements

Improving Access to Finance for Small Businesses

The UK has dynamic and flexible financial markets that are acknowledged to be among the most efficient in the world. Nonetheless not all businesses can get the finance they need to fulfil their potential. The government’s approach is to take targeted action to stimulate private investment where there are gaps in market provision.

To improve the availability of finance:

  • Teresa Graham is leading a review on the effectiveness of the Small Firms Loan Guarantee (SFLG). The review intends to publish its initial findings in spring 2004, and make recommendations in the summer.

  • The government intends to publish draft details of the pathfinder round of Enterprise Capital Funds (ECF) in the next three months. Full details will be published and the competition to apply to operate a pathfinder ECF will be launched when EU state aids clearance has been achieved.

  • Budget 2004 confirmed the enhancements announced in Pre-Budget Report 2003 to the tax incentives to invest in Venture Capital Trusts (VCTs) and through the Enterprise Investment Scheme (EIS), including;
    • raising the annual investment limit for VCTs to £200,000;
    • raising the annual investment limit eligible for income tax relief under the EIS to £200,000;
    • withdrawing the ability to defer liability for capital gains tax for investments in VCTs in favour of an enhancement, of equivalent value, to the incentives to invest through income tax relief; and
    • providing a temporary increase in the rate of income tax relief for VCTs from 20 per cent to 40 per cent for a period of two years. The government has decided to deliver this additional stimulus through a straightforward increase to 40 per cent in the rate of income tax relief paid to investors.

To make it easier for firms to access finance:

Financial intermediation

  • Accountants will work with Business Links to establish a self-accreditation programme for accountants and other business advisors providing advice to small businesses seeking finance.

  • The government will ask the Small Business Investment Taskforce to build upon their initial work on intermediation in the SME finance market by focusing on broader demand issues, and in particular the problems faced by start-up and early-stage firms.

  • The government is seeking views on its consultation on potential changes to the regulation of financial promotions to make it easier for small firms to raise finance from business angels. The government will, in implementing the European Prospectus Directive, assess whether the costs of issuing equity for small firms can be properly lowered.

Films

  • Budget 2004 announced that section 48 relief for low-budget British qualifying films, which is due to expire on 1 July 2005, will be replaced by a new relief for production expenditure. The relief will go direct to the film-maker and not to any third party. It will typically cover 20 per cent of the production costs of British films, compared with the 15 per cent typically provided by the current section 48 relief. The government is currently reviewing the treatment of co-productions with a view to creating a tighter definition of British Qualifying Status. The government will also consider the scope for the new relief to increase the proportion of British films that get distribution. Full details of the new relief will be published in summer 2004, following further discussions with the industry and others.

Budget Statement 2004: Summary Small Business Statements – Crown Copyright © 2004-2012

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