§ As the House knows, my right hon. Friends the Chancellor of the Duchy of Lancaster and the Chief Secretary and my hon. Friend the Under-Secretary of State for Industry—the hon. Member for Keighley (Mr. Cryer)—have been studying the problems of small firms. This study is still continuing, but I am now able to announce its first conclusions—mainly but not exclusively for changes in taxation.
1441§ It is argued that the taxation of business transfers is an inhibition on the growth of small firms. The 30 per cent. business relief for capital transfer tax will therefore be increased to 50 per cent. and it will be extended to deferred charges on forestry. There will also be a relief of 20 per cent. for minority holdings in unquoted companies. These additional reliefs will be limited to transfers of up to £500,000. I have also decided to increase the threshold for liability to capital transfer tax from £15,000 to £25,000. These changes will apply to transfers after today. The total cost will be £10 million in the current year, £65 million next year and £100 million in a full year.
§ To encourage business men to retain their profits in the business, I have decided to increase the threshold for the apportionment of trading income of close companies to £25,000. This will cost up to £5 million next year and £20 million in a full year.
§ The Government will also be considering before next year's Finance Bill certain further tax changes which could be of substantial help to small firms.
§ Very briefly, there are two proposals to encourage new businesses—the possibility of carrying back losses in the early years of an unincorporated business to set against the owner's other income in earlier years; and allowing relief from capital gains tax where a loss is made on a loan to a business. Then there is the possibility of tax facilities to help farmers and perhaps other unincorporated businesses plan their investment programmes.
§ In addition, the Chancellor of the Duchy of Lancaster will be announcing a number of other measures costing about £500,000 for the current year and £2½ million next year, which will help smaller firms to increase investment and employment.
§ Further details of the improvements in the treatment of small firms are set out in a Press statement by my right hon. Friend the Chancellor of the Duchy of Lancaster: copies of that and other Press notices are available in the Vote Office.
§ I now turn to my fiscal proposals for the current year 1977–78.