Hindsight Is Not The Only (Budget) 2020 Vision

Standard operating procedure for the Treasury in the run up to Budget Day in the UK: hold informal / formal briefings with members of the commentariat, flag up headline-grabbing policies that the Chancellor will likely announce at the Despatch Box on the big day, then sit back and let the scribes do the rest.

Budget 2020 has been no different. Pre-Budget Day articles in the press have been littered with predictions of what will come out of the Chancellor’s scarlet red box: increase in public borrowing; the turning on of the spending taps to fund ambitious infrastructure and innovation projects; cutting the national insurance bill for workers; scrapping red diesel relief; and unveiling a fiscal stimulus to deal with the outbreak of Covid-19. The accuracy of the conjecture has, as is often the case, been mightily impressive. For those who may have missed them, broad-brush headlines of today’s Budget include:

What did not get a mention at the despatch box, and in line with standard operating procedure did not occupy an overly excessive amount of column inches prior to today’s Budget, was business property relief (BPR), the tax break which enables family businesses to be passed down to the next generation without triggering a hefty inheritance tax bill. The tax break also covers businesses listed on London’s Alternative Investment Market (AIM). Under BPR, qualifying shares are fully exempt from inheritance tax subject to certain conditions, including owning the shares for at least two years.  The rationale behind the tax break is to encourage investment in small and early stage businesses which are generally associated with higher levels of risk when compared to larger and more established companies.

Remove these incentives and qualifying AIM companies lose an important source of investment. And coming on the back of what was a challenging year for the market, specifically in terms of declining membership – 82 companies left AIM during 2019 compared to 23 new listings – abandoning or even tinkering with BPR would have been a tough blow for the market to take. So even though the lifetime allowance for Entrepreneur’s Tax Relief is to be reduced from £10m to £1m, leaving BPR in place – now that calls for an extra large…