The 2015 Summer Budget Review

This week marked Chancellor George Osborne's first Conservative Budget and the first Conservative Budget at all since 1996.

Given the party's association with business, many were surprised to see the Chancellor announce a number of measures that have hit aspirational entrepreneurs and the self-employed quite hard.

The Business Sale Report has reviewed the Budget points that those looking to buy a business – or sell a business – need to take into account.


Removal of Tax Relief on Intangible Assets

In an unexpected turn of events, the Chancellor announced that the government plans to remove tax relief for intangible assets, such as goodwill, in business sales.

This will take place with immediate effect and is one of the Budget announcements expected to have the most notable impact on the M&A market, potentially causing delays in current deals. There has even been some suggestion that the instant implementation of the plan could cause some deals to be aborted entirely.

Matt Hall, head of tax at accountancy firm Wilkins Kennedy, commented on the plans: “The tax relief abolishment will have a knock on effect because businesses will no longer be able to claim relief against corporation tax – until the business is eventually sold.

“This is bound to have several implications and will be an unexpected, unwelcome result for businesses that are looking to sell. This could impact businesses looking to sell up in the short term and could even stall transactions that are in process.”


Access to Finance

One area that might offer signs of hope for business is the changes to finance rules, which will require the UK's major lenders to share any financial information they hold on small business to improve their chances of securing loans.

Further announcements confirmed that the British Business Bank will be required to work on “increasing and diversifying” the supply of SME finance and facilitate up to £10 billion in finance within four years.


Dividends Payment Changes

The potential positives of improved access to finance, however, will most likely be outweighed for many current small business owners by the changes to dividends payments.

Starting in April 2016, the Dividend Tax Credit will be removed and replaced with a tax-free Dividend Allowance of £5,000 for all taxpayers. However, top-rate taxpayers will also see that the top rate of tax on dividend income will increase from 30.6 per cent to 38 per cent.

This increase is likely to make a big change to many SME owners' incomes and there has been the suggestion that they will opt to sell their business.


Minimum Wage Rises

Continuing with the negative, and anyone looking to buy a business will need to keep in mind the increases in minimum wage, which will be set at £7.20 from next April and increase to a target of £9 by 2020. This rate will be compulsory for anyone over 25.

From a business buyer's perspective, forecast costs and business plans will need to be carefully considered and potentially revised if the acquisition in mind is heavily reliant on low-paid staff.


Slashing of Red Tape

In a Budget that was pretty negative for entrepreneurs and small businesses on the whole, we have endeavoured to end on a high note with mention of the Government's plans to cut red tape further. There are plans in place to reform tax systems in an attempt to simplify matters, and efforts continue to increase the digitisation of the system, which should save time and money for many SMEs.

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