Coaltion proposals to hurt region’s entrepreneurs?
Government proposals to cap tax reliefs that individuals can claim has already proved controversial, with the Chancellor George Osborne having to back down and exclude gifts to charities from the cap.
Now a new consultation document about the tax relief cap published recenly, called Delivering a cap on income tax relief: a technical consultation, spells bad news for entrepreneurs in the South West, according to PKF Accountants & business advisers.
The proposals would limit a range of tax reliefs – including relief on losses claimed against an individual’s other income in the same tax year or total income in an earlier year – to £50,000 or 25% of general income, whichever is the greater.
Tony Moorby, Director of Taxation Services at PKF’s Bristol office, comments: “This is an incredibly badly conceived idea. It has the potential to cause real pain for entrepreneurs as, in future, they may get a smaller refund on their losses or have to wait much longer to get tax relief.
“The proposals threaten the survival of many SMEs at a time when they are already finding it difficult to keep their heads above water, and may also discourage entrepreneurs from setting up new businesses in the future. I fear that companies will fold and entrepreneurs will be pushed into bankruptcy as a result of these plans.
“It is rather ironic that a Chancellor committed to supporting small businesses is cutting back on tax reliefs – entrepreneurs had previously been given more generous loss relief rules in the early years of the recession to help their businesses through the difficult times.
“No entrepreneur sets out to make losses over the long term but the existing rules recognise that new businesses are especially vulnerable, particularly during a downturn.
“The owners of micro-businesses are unlikely to be affected because of the £50,000 limit, but entrepreneurs who make larger losses could easily lose out on tax refunds that could be vital to their financial survival.
“If the Government really must press ahead with these proposals, it must at least consider raising the cap to somewhere north of £100,000 per annum so that fewer entrepreneurs in the South West are adversely affected by the proposals.”
To find out more about this issue, and the company please visit: http://www.pkf.co.uk. For more information about the consultation document please see here: http://www.hm-treasury.gov.uk/consult_income_tax_relief_cap.htm