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Peer2Peer Finance News | August 20, 2019

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Budget: Funding Options calls for SME tax breaks

Budget: Funding Options calls for SME tax breaks
Suzie Neuwirth

FUNDING Options is urging the government to cut taxes for small- and medium-sized enterprises (SMEs) in Wednesday’s Budget, in order to incentivise investment.

The online business finance supermarket, which is one of the three platforms selected to be part of the bank referral scheme, has called on Chancellor Philip Hammond to make four changes to help small businesses thrive.

The platform said the central measure the government should focus on is raising the annual investment allowance (AIA) – the amount of expenditure on plant and machinery that companies can claim against their corporation tax bills – back to £500,000. The government cut the AIA to £200,000 in January 2016 and investment by businesses using it fell 15 per cent, according to Funding Options.

Read more: SMEs set for £7bn cost surge in 2017

“The government has been talking for long enough about the productivity gap and must seize the chance to follow through on its words,” said Conrad Ford, chief executive of Funding Options.

“The tax system for SMEs needs to be realigned to boost investment, productivity, and growth.

“Big business will always have cash to pump back into their business, but more attention needs to be paid to smaller companies.”

Funding Options is also calling for the chancellor to lift the level of enhanced capital allowance to 105 per cent from 100 per cent and to introduce a tax system in which partnerships can benefit from research and development (R&D) tax credits.

Finally, the platform is urging for an extension to the business premises renovations allowance (BPRA), which is due to end in April. The BPRA is a 100 per cent tax allowance for business converting or renovating empty business premises in a disadvantaged area.

Read more: Most UK SMEs struggle to access finance          

“Some of the most important sectors in the UK are driven by partnerships – the UK’s legal industry, for example – that R&D credits don’t apply to,” said Ford. “The government should look into providing incentives for the legal sector and other professions to help ensure they maintain their position as global leaders.

“Extending the BPRA could kill two birds with one stone. Provide motivation for companies to invest in business space and growth, and prevent valuable space going to waste at the same time.”

The long-awaited bank referral scheme was launched last November and mandates nine of the UK’s biggest banks to pass on the details of small businesses they have rejected for finance to three aggregator platforms – Funding Xchange, Business Finance Compared and Funding Options.

These platforms will then share the details of the businesses seeking loans with alternative finance providers, including peer-to-peer lenders.  

Read more: A look back – the key P2P events of 2016