Blow for high-risk SMEs


Small ventures in high-risk industries are likely to be hit by an immediate change to the tax regime, says Peter Penneycard, tax partner at accountant PKF.

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Small ventures in high-risk industries are likely to be hit by an immediate change to the tax regime, says Peter Penneycard, tax partner at accountant PKF.

Small ventures in high-risk industries are likely to be hit by an immediate change to the tax regime, says Peter Penneycard, tax partner at accountant PKF.

The now-restricted sideways loss relief encouraged individuals ‘to invest in high-risk ventures by allowing them to write off initial losses against their tax bill, while opening up the opportunity for taxable profits if the venture succeeded,’ says Penneycard.

‘Loss relief has been a feature of investment partnerships for many years and reduced the initial risk for individual investors – making it easier for businesses operating in high-risk sectors to secure start-up funding,’ he adds.

In an effort to minimise tax avoidance, HM Revenue & Customs has announced that it is cutting sideways loss relief for capital contributions, by introducing a £25,000 annual limit on losses that can be used to offset income sourced outside the business.

The announcement, which is the latest in a long line of anti-avoidance measure by HMRC, has effectively cut off a ready source of investment capital to such businesses, meaning that many prospective ventures will have to look elsewhere to much more elusive funding methods.

For more information on raising finance, read this article.

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