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UK Tax Breaks Boosting SME Investment: Report

by Robert Lee,, London

11 August 2015

UK taxpayers are expected to reduce their inheritance tax (IHT) bills by a record GBP565m (USD881m) this tax year by investing in unlisted companies, according to private equity investment firm Radius Equity.

The firm noted that the UK Government permits those who have inherited shares in unlisted businesses to exclude the value of these assets from the estate's IHT bill.

The value of business property relief claimed by investors in small businesses has also increased considerably in the last two years, up five percent on the GBP540m invested in 2013-14 and 47 percent on the GBP385m invested in 2012-13. Business property relief allows investors to benefit from a 100 percent IHT relief on the value of unlisted shares after two years, provided the investments are still held at the time of death, the firm said. Business property relief is available on almost all investments that qualify for Enterprise Investment Scheme (EIS) tax reliefs, it added.

Radius Equity said the value of business property relief has not kept pace with the surge in IHT receipts. It suggested that there are therefore more families who could benefit from lower tax bills by investing in small firms.

HMRC collected £3.8bn in IHT receipts in 2014-15, up 23 percent on 2013-14.

Gary Robins, Director at Radius Equity, explained: "The increased take-up of tax reliefs emphasizes the growing investor appetite for investing in ambitious SMEs. The large increase in the amount of inheritance tax collected by HMRC shows that there is still more capacity for more investors to take advantage of the generous reliefs on offer. These reliefs not only minimize investors' inheritance tax bills, they also unlock a wider range of funding opportunities for SMEs – vital for their growth as many still find it difficult to secure lending from banks."

TAGS: inheritance tax | tax | investment | small business | business | private equity | tax incentives | equity investment | United Kingdom | small and medium-sized enterprises (SME) | tax breaks

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