Funding for SMEs could be reduced by Budget
Mar 11 2008
With Chancellor Alistair Darling’s first Budget looming, small business owners will be concerned about the implications for their enterprises. Investor confidence will rise or fall depending on the outcome of Wednesday’s Budget.
SmallBusiness.co.uk asked DBA Group chief executive David Blair, who has a record of supporting early-stage companies, to comment.
Blair says: ‘Young companies are already feeling the squeeze as venture capitalists turn their attention elsewhere and the burden of investment falls to business angels.’
Yet, he explains, it is essential that the Chancellor clarify the current capital gains tax reform. The proposed entrepreneurs' relief means that the first £1 million of gains arising on the disposal of a business in an entrepreneur’s lifetime is taxed at ten per cent.
‘My concern is that serial entrepreneurs or serial investors, when they've used up their £1 million allocation, will look around for other things rather than investing in more early-stage companies.’
As these investments are so risky and take so long to come to fruition, investors won't know whether a gain has been made or not until they exit from their current portfolio, says Blair. This might discourage them from making investments in numerous companies as, if more than one is successful, they could incur a higher tax rate. The amout of funding available for small businesses could be significantly reduced.
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