HC Deb 19 April 2000 vol 348 cc588-90W
Mr. Burstow

To ask the Chancellor of the Exchequer what proposals he has to stimulate investment in and expansion of small businesses; and what proposals he has to remove disincentives to the retention of profits for the purpose of reinvestment in small unincorporated businesses. [119779]

Dawn Primarolo

The recent Budget 2000 took further steps to boost investment in and expansion of small business. These measures form part of the Government's drive to raise productivity across the economy by encouraging enterprise development.

The measures to stimulate investment in small businesses included: cuts in capital gains tax to create the most favourable environment Britain has ever seen for encouraging entrepreneurs and investment in small business; an extra £100 million for a new £1 billion target "umbrella fund" for small scale venture capital investment across the regions over the next three to five years; a new corporate venturing tax relief, designed to promote investment by larger companies in smaller enterprises, which can play a vital role in providing finance and other benefits to innovative small firms; and changes to the Enterprise Investment Scheme and Venture Capital Trusts will make the schemes more attractive to investors and boost the availability of venture capital for small higher risk trading companies.

The measures to encourage expansion of small businesses by reinvesting their own resources include: reductions of the small company corporation tax rate from 23 to 20 per cent., and introduction this year of a new starting rate of corporation tax of 10 per cent. for the first £10,000 of taxable profits, with the benefit tapering away as profits rise to £50,000; a new R&D tax credit designed to encourage investment in R&D by small and medium-sized companies; extending permanent enhanced first year capital allowances (at 40 per cent.) for small and medium-sized firms to encourage investment in plant and machinery; introducing 100 per cent. capital allowances for small enterprises investing in IT equipment over the next three years.

The Government have no specific proposals to encourage the retention of profits for the purpose of reinvestment in small unincorporated businesses. However, reductions in income tax rates introduced in the 1999 Budget and the changes to capital allowances for small businesses in the Budget 2000 combine to boost the post-tax revenues of small unincorporated businesses, enabling them to invest more in their future growth.

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