We noted the good news from the Budget – the announcement of plans to consult on Venture Capital Schemes and AIM shares’ inclusion in ISAs. There were a few other measures that should be flagged for small and mid-cap quoted companies:
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Increase in lifetime limit on entrepeneurs’ relief from £1m to £2m – While this is a step in the right direction and welcomed, it still does not come close to the concessions provided by the relief’s predecessor, the capital gains tax taper relief regime.
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Corporation tax rates remain the same – It is welcomed in this economic environment that the levels have remained at 28% and at 21% for the small companies’ rate.
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Company share options plans: anti-avoidance – This reform will prohibit a feature of company share option plans (CSOPs), which allows options to be granted over shares in a subsidiary of a listed company. HMRC is trying to prevent ‘geared growth’ arrangements; however, the proposal goes far wider than necessary and unfortunately will prevent schemes being run for commercial and proper reasons in qualifying subsidiaries from receiving approval. The QCA Share Schemes Committee has written to HMRC highlighting this and will be discussing ways this proposal could be more targeted.
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Anti-avoidance and JSOPs – There was an announcement on HRMC’s website that there will be “a review and consultation, during 2010, on taxation of geared growth arrangements used in connection with employment related securities…”. This suggests that HMRC will review what is commonly referred to as joint share ownership plans (JSOPs), which have been popular arrangements lately. The QCA Tax and Share Schemes Committees will be watching to see what comes out of this.
