Small Businesses (Tax Concessions) (Hansard, 27 April 1989)

§ Mr. Norman Lamont

In line with the Government's policy of encouraging enterprise, tax changes intended to benefit small businesses have been introduced in each Budget since 1979. Details are as follows:

1979 Budget Small companies' profit limits raised to £60,000 and £100,000.

1980 Budget Venture capital scheme introduced; costs of raising business loan finance allowed as tax deduction against trading income; small companies' profit limits raised to £70,000 and £130,000; small companies' corporation tax (CT) rate reduced to 40 per cent.; capital gains tax (CGT) exemption limit increased to £3,000; removal of double charge to CGT and capital transfer tax (CTT) on gifts; CTT threshold doubled to £50,000; introduction of small workshops scheme; relaxation of conditions for tax relief for interest paid on money borrowed for investment in, or lending to, a close company; close company apportionment rules abolished in respect of trading income; VAT registration threshold raised broadly in line with inflation; percentage limit on retirement annuity relief increased and abolition of ceiling on premiums qualifying for relief; measures to encourage employee share ownership; easing of administrative burden on sub-contractors tax deduction scheme; pre-trading revenue expenditure allowed as deduction against trading income.

1981 Budget Venture capital scheme extended; Business Start Up Scheme introduced; small companies' profit limits raised to £80,000 and £200,000; extension and relaxation of interest relief on money borrowed for investment in a partnership co-operative; VAT registration threshold raised broadly in line with inflation; threshold for tax relief on redundancy payments increased to £25,000; introduction of pilot loan guarantee scheme.

1982 Budget Expansion of business start up scheme; no advance corporation tax (ACT) or income tax charge on certain purchases of own shares by unquoted trading companies; small companies' profit limits raised to £90,000 and £225,000; CGT exemption limit increased to £5,000 and indexed for future years; CGT indexation of gains introduced; CTT threshold increased to £55,000 and indexed for future years, rate bands extended; beneficial changes to interest relief rules for investments in close companies made by working managers; 596W VAT registration threshold raised broadly in line with inflation; deduction for VAT paid on supplies of services to VAT registered traders before registration; limits of retirement annuity relief for older contributors increased; qualifying period for tax relief for pre-trading expenditure increased to three years; business contributions to local enterprise agencies to be tax deductible; extension of small workshop scheme for very small workshops; extension of pilot loan guarantee scheme.

1983 Budget Introduction of business expansion scheme (BES); small companies' CT rate reduced to 38 per cent.; small companies' profit limits raised to £100,000 and £500,000; CGT exemption limit raised in line with inflation; CTT: threshold increased by more than inflation, longer period for paying tax on business assets without incurring interest charge; further measures to encourage employee share ownership; de minimis limit for assessment of investment income apportioned to members of a close company increased to £1,000; interest relief extended to employee buy-outs; VAT registration threshold raised broadly in line with inflation; extension of loan guarantee scheme.

1984 Budget small companies' CT rate reduced to 30 per cent.; further measures to encourage employee share ownership; CGT exemption limit raised in line with inflation; CGT rollover and retirement reliefs extended to furnished holiday lettings—enables landlords of such properties to claim same deductions as traders; highest rate of CTT cut to 60 per cent., rates for lifetime transfers reduced to half those on death; VAT registration threshold raised broadly in line with inflation; self-employed required to live in job-related accommodation given mortgage interest relief for purchase of own home elsewhere; National insurance surcharge abolished; relaxation of conditions for interest relief applied to employee buy outs; Investment income surcharge abolished; retirement relief doubled to £100,000.

1985 Budget Tax relief on half class 4 NIC; extension of BES; reform of capital gains retirement relief, reducing qualifying age and introducing ill-health relief; extension of indexation to give full relief for assets held since 1982; VAT registration threshold raised broadly in line with inflation, extension of bad debt relief.

1986 Budget small companies' CT rate reduced to 29 per cent.; BES extended and targeting improved; Inheritance tax (IHT) replaced CTT, thereby abolishing tax charge on most lifetime gifts; Increase in CGT small part-disposals relief unit; VAT registration and deregistration thresholds raised broadly in line with inflation; Enterprise allowance scheme expanded; Employee share schemes: improved access for unquoted family companies, employee controlled companies, worker co-operatives; Loan Guarantee Scheme extended an premium halved.

1987 Budget Small companies' CT rate reduced to 27 per cent.; package of measures to lighten VAT burden on small businesses including: cash accounting and annual accounting for businesses with turnover of up to £250,000, period in 597W which businesses obliged to register extended to 30 days, simpler schemes to be more widely available for small and medium sized retailers; VAT registration threshold raised broadly in line with inflation; standstill in fuel duties and most vehicle excise duty rates; BES changes to reduce effect of investment bunching in last quarter of tax year; small companies' rate of CGT reduced to 27 per cent. with ACT offset against liability on gains; ceiling for capital gains retirement relief increased to £125,000; IHT business relief increased from 30 per cent. to 50 per cent. for minority holdings over 25 per cent. in unquoted companies; IHT threshold increased by more than inflation; introduction of tax relief for profit related pay (PRP); new simplified occupational pension schemes will help small employers set up own schemes; personal pensions introduced with improved, age related contribution limits.

1988 Budget small companies' CT rate reduced to 25 per cent.; small compamies' CGT charges reduced to 25 per cent.; BES targeting improved to help smaller and newer businesses; CGT retirement relief considerably extended, 50 per cent. relief introduced for gains between £125,000 and £500,000; CGT rollover relief extended to milk and potato quotas; VAT registration threshold raised broadly in line with inflation; abolition of capital duty; major changes to rules applying to unapproved employee share schemes; simplification of IHT: flat rate of 40 per cent., threshold increased by more than inflation; exemption for capital gains accruing before April 1982.

In addition, the following proposals are contained in this year's Finance Bill: small companies' profit limits raised to £150,000 and £750,000; simplification of pensions rules and substantial increases in personal pension contribution limits; improved tax reliefs designed to encourage employee participation in PRP and employee share schemes (including ESOPS); abolition of close company apportionment rules; extended relief for pre-trading expenditure;

VAT registration threshold raised broadly in line with inflation: CGT gifts relief retained for business assets. And, of course, small businesses will also have benefited from the major reductions in the rates of income tax since 1979.