What the ‘Mini Budget’ means for growth businesses

Like you, we’ve been keeping a watching brief on how the new Government’s ‘growth plan’ or so-called ‘mini-budget’ will impact start-ups and businesses of all sizes. There’s lots to be mindful of, but we’ve prepared a short summary of the key points that we hope will be helpful. If in doubt, please pick up the phone and we can talk you through the changes. In brief, there will be an increase in sources of funding, investment and tax reliefs which will likely impact businesses who may now qualify for certain schemes, wider options on sourcing of funds, more incentive for investors and higher threshold for employee incentive schemes.

Key things to note, include:

SEED ENTERPRISE INVESTMENT SCHEME (SEIS)

  • The limit will be increased by two-thirds, from £150,000 to £250,000 allowing companies to raise funds up to £250,000 and capitalising on tax relief for individual investors.
  • Eligible companies will now include those with a gross asset limit of £350,000 as opposed to the limit of £200,000.
  • The “New qualifying trade” criteria cap will be increased from 2 years to 3 years
  • The annual investor limit will be increased from £100,000 to £200,000.
  • These changes are ear-marked to be implemented by April 2023.

COMPANY SHARE OPTION PLAN (CSOP)

  • The current limit of £30,000 for the acquisition of shares at a fixed price (market value) under a CSOP option plan for directors or employees will be doubled to £60,000.
  • The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies. *Please note that this has not been explained fully in the growth plan.
  • These changes are ear-marked to be implemented by April 2023.

ANNUAL INVESTMENT ALLOWANCE

  • The Annual Investment Allowance will be made permanent at £1M, instead of letting it fall to £200,000 after 31 March 2023. “This will support business
    investment, provide businesses with more stability, and make tax simpler for any business investing between £200,000 and £1 million in plant and
    machinery.”
  • Implementation by 31 March 2023

ENTERPRISE INVESTMENT SCHEME (EIS) AND VENTURE CAPITAL TRUSTS (VCT)

  • No changes here, however, may be extended in the future. (ref para 3.12 of the growth plan)

INVESTMENTS FOR TECHNOLOGY & SCIENCE BUSINESSES

  • There will be a plan to launch a Long-term Investment for Technology & Science (LIFTS) competition which will provide up to £500 million to support
    new funds designed by institutional investors and world-class fund managers, aiming to crowd billions of pounds of private investment into UK science and technology businesses.
  • The launch for proposals to identify promising fund structures and vehicles is earmarked for end of 2022, with the intention that funds go live as soon as possible in 2023.

CORPORATION TAX WILL NOT INCREASE

  • Note: planned increase of corporation tax for April 2023 will not go ahead.
  • UK corporation tax rate to remain at 19% on taxable profits.

Reference: The Growth Plan 2022 (publishing.service.gov.uk)