Small high-risk ventures will be hit by a change in the tax regime, it has been claimed.
Peter Penneycard, tax partner at PKF Accountants said that the announcement by HM Revenue & Customs that it is ending ‘sideways loss relief’ will affect high-risk enterprises.
Sideways loss relief allows individuals to invest money in high-risk ventures and write off initial losses against their tax bill. Any profits made if the venture succeeds are then taxable.
Industries that previously benefited from the tax benefit included the bio-tech and ‘green’ research businesses – and in particular, the film industry.
“The BBC's Dragon's Den program has shown us all how hard it can be to raise finance for a start-up business,” said 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.
“Today's announcement has effectively cut off a ready source of investment capital to such businesses.
“Many prospective businesses will have to look much harder to find alternative funding. It is going to be particularly difficult for those operating in sectors like biotech or film where returns can be high but the chance of failure is equally great.”
© Crimson Business Ltd. 2007
