Small Talk: The new tax break for small firms that may go begging

 

How many small and medium-sized enterprises will take advantage of the 'patent box' regime that comes into force next April? It's a potentially valuable new relief that rewards businesses which have generated profits from intellectual property by charging them less tax – just 10 per cent – on the money.

However, KPMG is worried many SMEs will not claim the money. The accountant is already advising larger businesses on how to exploit innovation they have patented, but says smaller companies have so far been much slower to take an interest.

KPMG reckons it is because they assume the relief will be so complicated that the value of the tax break will be eaten up by a tortuous and time-consuming claims process. Jonathan Bridges, an associate partner at KPMG, explains: "Small and medium-sized businesses are sometimes concerned that the costs and hassle of claiming a tax relief might outweigh the financial benefits."

That is unfortunate, given that the patent box might save an SME as much as £12,000 on intellectual property-driven profits of £100,000 a year. But despite all the promises, SMEs still have to jump through hoops to comply with the tax system.

Take the proposals to cap tax reliefs for individuals. The latest detail, published last week, makes it clear that entrepreneurs will not be allowed to claim relief on business losses worth more than £50,000 or 25 per cent of their general income, whichever is highest.

Lisa Macpherson, the national director of tax at PKF, the accountancy firm, says this could be disastrous in some cases: "I fear companies will fold and entrepreneurs will be pushed into bankruptcy as a result of these plans."

The government has acknowledged the problems many small businesses faced and promised to prioritise their concerns. One of its most high-profile pledges was a "one-in, one-out" rule for red tape – that ministers would introduce no more business regulation without first abolishing an existing rule.

This promise hasn't been kept. A new analysis from the British Chambers of Commerce reveals that 50 per cent of regulation introduced over the past year has been deemed "out of the scope" of the one-in, one-out regime. In other words, ministers have decided they do not have to abolish existing regulations to accommodate these new ones.

Those figures should be a huge embarrassment to the Department for Business. Ministers appear to be fiddling their own system.

Range's Landau digs into silver

Look out for Black Mountain Resources, the silver miner that joins the Alternative Investment Market on Wednesday. Mining followers will spy a familiar face amid the company's executive management – one of its directors is Pete Landau, who is better-known for his role at Range Resources, the oil and gas explorer.

Unlike many natural resources companies coming to Aim, Black Mountain is very close to production – it reckons mines in Montana and Idaho should be up and running by the final quarter of this year. The mines were exploited in the past, and are being reopened.

In the longer term, the company also hopes for upside from resources it is exploring beyond its current mines, and some of the revenues from its initial production will support those developments. The company's market cap, on listing, should be around £11m.

HK teacher on course for Aim

Is there a way to cash in on the "Tiger Moms" of China? Hong Kong-based LZYE Group, which will today announce a flotation on the Alternative Investment Market, hopes so. Founded in 2000, it runs 500 classes a week for kids aged between six months and 12 years in Hong Kong and wants £3m for investors to finance a push into China.

LZYE is already in talks with the authorities in six Chinese cities, with a view to opening 12 new centres initially. Its course materials are primarily sourced from education providers in the West, which the company hopes will appeal to the Chinese market.

LZYE's float will see it sell 14 per cent of the company, though investors will demand a thorough explanation of its route-map to profitability. In the 12 months to 31 March, it lost HK$20.1m (£1.66m), against a loss of HK$13.6m the previous year.

Small businesswoman of the week: Online shopping venture that is clicking with charity, too

Polly Gowers, chief executive, Everyclick

I founded the business in 2005 in my garden shed around the idea that the internet was an incredibly powerful sales channel that could be used to deliver vast amounts of money to charity without people having to find any money to donate.

We launched Give As You Live 18 months ago: it’s a piece of software that you download just once – thereafter, every time you shop with one of 2,000 of our retail partners, you will have the option of channelling money to any one of the 220,000 registered charities in the UK.

The money comes from the marketing budget these retailers have set aside to recruit and retain online customers – we are just another sales channel – so the shopper pays nothing at all.

So far, we’ve signed up 20,000 customers and generated charitable donations of £2.6m, but we’re growing at 50 per cent a month. Though we are a business – we also earn a commission from the retailers – we’re driven by unlocking the millions of pounds hidden in online retail for charitable concerns. Our aim is to turn Give as you Live into a sales medium people will want to use irrespective of its support for good causes.

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