Category Archives: Government support

Little known advantages of owning a business.

Small business tax refliefYesterday’s budget reminded me that there are still considerable tax benefits to owning your own business, beyond the normal personal tax choices of taking salary, or dividends.

The Chancellor has for a start not only continued with the Entrepreneur Relief Rate of 10% but expanded it up to a value of £5M. Now many entrepreneurs busy beavering away on growing their business, may not even know about this advantage. But if your hard work and persistence results in a successful business, you may want to sell it, or even just retire from it at some point.

When you do sell it, instead of paying the current Capital Gains Tax rate, you can just pay 10%. That’s a fantastic benefit and most people are not aware of it. There are of course certain requirements you must meet, such as at least owning 5% of voting shares in the company for longer than a year, so check with your accountant.

Interestingly it also includes selling just a share of the business, business property (not letting properties though) and your own property that may have been used for a business, so lots for an accountant to have fun with.

There’s more… how about not paying any Inheritance Tax (IHT) on a major asset left to your children, partner or beneficiary of your will? That is exactly the case with a business. If you leave your business to someone when you die (sorry to be morbid, but it’s important), the beneficiaries pay no tax on it.

Given you’ve worked hard to build the business up, it’s comforting to know that if the worst happens, your family or dependants could inherit that business without giving the taxman part of it. Not the case with most other assets.

There’s just a couple more reasons for being an entrepreneur and for a change hard work does get it’s rewards.

 

Should government have a focus on growing new businesses?

Can government help start businesses?During the latest recession as skilled or senior professional people suffered redundancy, many decided to start their own businesses. Some escapees from the crash of the City actually became Investors into young businesses.

With the huge cuts to public spending now being implemented there will undoubtedly not only be direct job losses, but with contracts being cancelled and bought-in consultancy slashed, there will be massive collateral damage to the private sector as well.

This could be an opportunity to help some of the affected become self-sufficient and start their own businesses. Where else will they find a new job with the mayhem that is about to hit the jobs market?

There will be a wonderful pool of talented yet frustrated ex-employees that will be keen to make a new life of self-employment rather than face the despair of applying fruitlessly for a dwindling supply of suitable jobs. Surely now is the perfect time to help them achieve this.

However, the announced cuts already talk about reducing the regional development funds and I can’t see any attention being given to helping start-ups or growing businesses.

I think the new government is missing a huge trick here. This is the perfect opportunity to provide a focus on young businesses. Producing a programme that encourages entrepreneurs to grow their own companies and in turn delivering growth to the UK.

 

Why must a hung parliament mean doom for business?

Politicians in a hung parliamentWell let’s first look at the terminology “hung parliament”. It is a term that is designed to send shivers down your spine. Hung, drawn and quartered, a hung jury, hung from the highest tree.

It provokes the public into a sense of unease, if not outright terror. The danger is that this sense of doom can translate into a self fulfilled prophecy with less consumer spending as the public starts to gird their loins against the terrifying consequences of politicians having to put aside party self-interest in order to work together for the good of the Nation.

Yet need it really be like that? Apparently we are paying a good level of salary and additional benefits in order to attract the brightest of people to be MPs. People who say they put the interest of the Nation before all else. Yet we are fully expecting them to act like unruly gangs in a school yard, destroying the play equipment and breaking the school windows.

Shouldn’t we instead insist that they act like the intelligent public servants that they claim to be and put away the sling-shots and stones in order to work together to run the country.

While it was necessary to scaremonger about “hung parliaments” during the election campaign to stop the public from voting for that nice Mr. Clegg, it can stop now.

Germany’s three main parties work together as a coalition government, Greece has a single party. Which has the stronger economy?

With all that has happened recently to destroy the public trust in members of parliament, now would be a good time to show that they can after all behave responsibly and help to grow the economy, rather than see it wither for their own political self interest.

 

What should replace Business Link?

Who will replace Business LinkThe Tories have vowed to get rid of Business Link, the government-funded business advice service in England, but what if anything will replace it?

Business Link has had over the years a mixed reputation. Your view of the whole organisation usually depended on which adviser you were allocated.

I certainly remember my original encounter with them. I was starting my first business, an IT consultancy and was looking for any advice and help I could get. Having made sure that I was at my free one hour consultation 10 minutes early, I sat kicking my heels until the adviser finally turned up 40 minutes late.

“I’ve been having trouble with the #%*! central heating, mate” was his reason; ironic really since his background and expertise turned out to be as a plumber. I then was entertained for 19 minutes by tales of his plumbing business, before being told the best thing I could do was to go on a business planning course. Since I’d just finished my MBA and had sat through more lectures on business planning than I cared to remember, I wasn’t feeling greatly helped.

I grabbed the last minute to try and describe what I wanted to do as a business, but he was only interested in getting me to sign his time-sheet to say I had received my advice.

However I have heard very encouraging stories from some of our members and so I try and remain positive, but I shall probably not shed too many tears if they do go. The question is what should replace them and what will happen to the £190m currently being spent on Business Link.

The view of the Conservatives, should they come to power, is that they will instead boost the role of the local enterprise agencies. These have services that overlap those of Business Link, but I have found these organisations to be quite confusing to young businesses.

Many are run by private companies and it can be difficult to tell which are commercial organisations looking for customers and which are non-profit. They also suffer from the old criticism of Business Link, before they started to get their act together, that there is no uniformity, each presents itself in a completely different way.

Now if we accept that we are not trying to put in place one uniform monolithic organisation, but to have individual local organisations that may be privately run, but meet certain standards and deliver a locally needed service that’s fine. However the public understanding of what a local enterprise agency is and does needs to be made clear.

Doug Richard, of Dragon’s Den fame, has the view that: “We must sweep clean the entire government funded industry of business support and leave behind solely an institution whose remit is to expedite and simplify the effort of small business to manage the burden that government places upon it.”

This implies that there are no government funded enterprise services, but that instead the government just concentrates on its own processes, making them easier for small businesses to deal with.

That is a reasonable argument, that entrepreneurs don’t any longer need all the information and services that ‘business support’ groups give out; after all we now have Google and the Internet. Just stand back and let us get on with it. Maybe using the funds instead to give tax advantages to start-ups.

I like to think that after the next election, whoever is in government would work on creating a ‘culture of enterprise’. This spans the entire spectrum of changing the perception and attitude of financial institutions to entrepreneurs, incentives to people starting a business and yes also reducing the red-tape.