Small Firms (Hansard, 22 January 1987)

§ Mr. Trippier

Our measures have concentrated on tackling the particular disadvantages faced by people setting up a new business or expanding an existing small firm.

Finance The availability of finance to small firms has been improved by: 1. The loan guarantee scheme started in 1981, which aims to provide finance to viable businesses which fail to get commercial financial hacking. Individual term loans up to £75,000 are made available for between two and seven years, with a Government guarantee on 70 per cent. of each loan. 658W Small businesses in most sectors are eligible. The 1986 Budget extended the scheme for a further three years and reduced the cost to borrowers by halving the premium on loans. 2. The business expansion scheme, started in 1983, provides income tax relief on new equity investment in unquoted companies. The scheme was extended in the 1986 Budget and targeted better towards genuinely risky enterprises. 3. The venture capital scheme encourages the provision of finance by enabling individuals and investment companies to claim income or corporation tax relief on losses incurred on disposal of new shares issued by unquoted trading companies. 4. The enterprise allowance scheme, started in 1982, encourages unemployed people to start their own businesses. It pays an allowance of £40.00 per week for up to a year. More than 200,000 people have already started up businesses with the help of the scheme. There is now greater emphasis on business advice, counselling and training for people in EAS.Premises 5. The small workshops scheme was designed to stimulate private sector investment in small industrial premises. From March 1980 to March 1983, a 100 per cent. initial building allowance was given for capital expenditure on the construction of workshops not exceeding 2,500 sq ft. The scheme was extended for a further two years for premises not exceeding 1,250 sq ft, and ended, as planned, in March 1985. Research indicates that the scheme led to a substantial increase in premises for small businesses. 6. English Industrial Estates Corporation has concentrated on providing premises for small businesses (up to 2,500 sq ft). Special rental and tenancy agreements have been devised to meet the needs of small businesses and entrepreneurs. E1EC works with a number of public sector agencies—the Department of Trade and Industry, the Development Commission, universities and the Scottish and Welsh Development Agencies.Training 7. The Manpower Services Commission has provided training courses for the self-employed and small business man since 1977, but since 1984 the volume and range of provision has greatly increased to give over 50,000 training places in 1986–87. For business start-ups there are the business enterprise and new enterprise programmes; for established business projects there are the private enterprise and management extension programmes; and for graduates there are the graduate enterprise programme, and the graduate gateway programme.Government purchasing 8. The Government have improved small firms' access to information about purchasing Departments, their procedures, requirements and points of contact. A Department of Employment booklet on "Tendering for Government Contracts" has been supplemented by some individual Departments' own publications and information published on Prestel. Tendering and approval procedures have been simplified by exempting suppliers to most Government Departments from normal approval procedures for contracts under £10,000, allowing non-approved firms to tender for non-urgent contracts subject to subsequent approval, and regular reviews by Departments of tender lists to encourage new suppliers. 9. The Ministry of Defence launched in 1986 a small firms initiative to increase competitive opportunities for small firms. This includes the creation of the small firms advice division in the procurement executive to supervise the initiative, provide a focal point for developing MOD policy towards small firms, and provide advice and assistance to small firms; a small firms research initiative to enable small firms able to generate innovative products and processes cost effectively to obtain a larger share of MOD research funds; appointment of small firms representatives to the boards of MOD research and development establishments; steps to ensure all local MOD purchasing officers are keenly aware of the initiative; and plans to hold a conference or regional seminars to explain the initiative to small firms.Innovation 10. The Small Firms Merit Award for Research and Technology, started in 1986, aims to encourage small firms 659W and potential entrepreneurs to bring forward highly innovative ideas that cannot attract existing sources of funding. This competitive scheme is being run by the Department of Trade and Industry on a one year trial basis in biotechnology and instrumentation.Taxation 11. The ability of individuals to start businesses and develop them has been improved by a wide range of tax changes. Capital gains tax exemption limits have been increased to £6,300. Retirement reliefs have been extended to cover retirement at 60, retirement through ill health and disposal of shares in family holding companies of trading groups. Indexation has been improved and extended as have rollover reliefs. Reliefs have also been introduced to facilitate the incorporation of businesses, and losses on loans made for business purposes can now be offset against capital gains tax. 12. Significant changes to capital transfer tax were introduced between 1979 and 1985 to increase thresholds from £25,000 to £67,000 and increase rate bands. From 1981, only transfers within the preceding ten years were taken into account in assessing cumulative total CTT liability. In 1986, the charge on lifetime gifts was abolished and the tax was renamed inheritance tax with the threshold increased to £71,000 with further increases in rate bands. These changes will further facilitate the transfer of a business from one generation to the next without the need to dilute assets to meet the consequent tax liability. 13. Income tax relief is available on personal borrowings raised to make investments in partnerships, close companies, cooperatives and employee buy-outs. Relief is also available for interest on loans to partners buying plant and machinery for use in their partnership business. 14. Losses incurred in any of the first four years of trading by a new business carried on by an individual can qualify for special income tax relief. This can be obtained against earnings during a three year period before the new trade started. 15. Expenses incurred in the process of setting up a new business are now deductible from subsequent trading profits so long as the expenditure is undertaken in the three years prior to the start up.Deregulation 16. Two White Papers "Building Businesses… Not Barriers" (Cmnd. 9794) and its predecessor "Lifting the Burden" (Cmnd. 9571) included detailed proposals for improvements in areas such as planning, VAT collection and employment law, and have generally aimed to simplify business dealings with Government. The enterprise and deregulation unit at the Department of Employment is coordinating action, for example in reviewing licensing and local legislative procedures, and a new system monitors the compliance costs of new regulations to business. 17. Planning authorities have been urged through Department of Environment circulars to approve applications for small business development, unless there are strong and specific objections. For example, Department of Environment circular 14/85 on development and employment reaffirmed the principle of presumption in favour of development, and urged planning authorities to have special regard to the needs of small firms and the self-employed. 18. Simpler and more flexible building regulations came into force in England and Wales in November 1985. Small detached buildings with floor area less than 30 square metres and with no sleeping accommodation are now exempt from control. 19. Measures have been introduced to ease the burden of employment protection legislation on employers, particularly small employers. A longer qualifying period is now required for unfair dismissal complaints. 20. Industrial tribunals are now required to take account of the size and administrative resources of a firm in deciding on the fairness or unfairness of a dismissal. 21. Changes to the maternity reinstatement provisions have included relieving firms with five or fewer employees from the obligation to reinstate an employee where it is not reasonably practical. 22. Redundancy rebates have been retained for firms employing fewer than 10 employees.660W

A number of changes have been made to Health and Safety Executive and Department of Health and Social Security regulations and procedures to ease burdens on small employers: 23. Raising the threshold for the requirement to prepare written safety policies to firms of 20 employees and above. 24. Giving specific training to inspectors to increase awareness of small firms' interests. 25. Designating one of the Health and Safety Commission commissioners to represent small firms' interests. 26. A small firms working group sub-committee has been set up to consider new leaflets geared to small firms, ways of seeking out unregistered small firms, and the training of local authority health inspectors in the problems of small firms.

Information required from small companies has been reduced by: Information 27. Under the Companies (Accounts) Regulations 1979 particulars of turnover are no longer required to be included where annual turnover is less than £1 million. 28. The Companies Act 1981 further reduces the amount of detailed financial information that small companies must file with the Registrar of Companies and simplifies the arrangements for approval of company names. 29. The Government have announced their intention of relaxing the rules governing the amount of information small companies are required to disclose in their accounts within the constraints of EC law and Inland Revenue needs. They also intend to extend the Companies Act definition of a small company to the maximum allowed under EC rules. Advice 30. The small firms service has been greatly expanded and improved since 1979. The service provides advice and information to small firms. Particular developments have included more small firms centres and counselling teams, a factsheet system, and a computerised database. Since 1985, the service has concentrated on specialist counselling skills and supplementing the work of local enterprise agencies. 31. Encouragement has been given to the growth of local enterprise agencies, independent private sector led organisations which provide help and advice to small firms. Full relief from corporation tax is given for business contributions (in cash or kind) to LEAs in the United Kingdom approved by the Government. A major five year scheme of financial assistance started in 1986, aims to establish a network of viable self supporting agencies. (Similar financial assistance has also been made available to LEAs in Scotland and Wales through, respectively, the Scottish Development Agency and the Welsh Development Agency.) 32. The Council for Smaller Industries in Rural Areas provides rural small businesses with advice through 32 offices on local opportunities and conditions, business management, marketing and technical advice, skill training and financial services. 33. Outside consultancy advice is subsidised in the business and technical advisory services run by the Department of Trade and Industry which provides subsidised consultancy to small and medium sized firms on productivity, design and quality assurance. BTAS was extended to include marketing from September 1986. 34. The business improvement services package of schemes, run by the Department of Trade and Industry, aims to help small firms in areas affected by job losses in particular industries—steel, textiles, shipbuilding, deep sea and tin-mining areas. Grants are available for consultancy advice on marketing, financial management, the application of computers and licensing in of products and processes, as well as for common services for groups of small firms and for investment projects. Support in particular sectors 35. The Government sponsor the Co-operative Development Agency. Sponsorship of the CDA was extended in 1981 and 1983. The Co-operative Development Agency and Industrial Development Act 1984 extended the agency's mandate for a further six years and gave it limited additional powers. 661W 36. The small engineering firms investment scheme operated in two phases to help small engineering firms to invest in certain types of advanced capital equipment. The scheme cost about £130 million.