March 2015 Budget: implications for finance lawyers

Practical Law UK Legal Update 0-605-0625 (Approx. 7 pages)

March 2015 Budget: implications for finance lawyers

by Practical Law Finance

SME banking: access to finance and competition

The government announced various measures to support access to finance by small and medium-sized enterprises (SMEs) and competition in lending to SMEs. The following may be of particular interest to finance lawyers.

British Business Bank

SME access to finance

To improve access to finance for smaller firms, the British Business Bank is launching a pilot "Help to Grow" programme to increase the supply of growth loans to firms that need between £500,000 and £2 million to achieve their potential. The March 2015 Budget announced a request for proposals to deliver the pilot, which will facilitate up to £100 million of finance for growing businesses.

For background on the British Business Bank, see Practice note, Government finance initiatives: Business Bank.

(2015 Budget Report, paragraph 1.199.)

Competition in SME lending: credit data sharing

The British Business Bank will shortly be inviting expressions of interest from credit reference agencies and finance platforms that wish to be designated by HM Treasury to receive SME data from banks under powers contained in the Small Business, Enterprise and Employment Bill currently before parliament. This will lower barriers to entry and level the playing field by allowing small banks and non-bank providers access to potential SME borrowers and the information held on them by the big banks, allowing them to compete more effectively.

For background on this measure, see Legal update, 2014 Autumn Statement: key finance announcements: Credit data sharing.

For background on the Small Business, Enterprise and Employment Bill, see Practice note, Small Business, Enterprise and Employment Bill: issues for finance lawyers: Lending: SMEs and access to finance.

(2015 Budget Report, paragraphs 2.217 and 2.218.)

Peer-to-peer lending

As announced in the 2014 Autumn Statement (see Legal update, 2014 Autumn Statement: key finance announcements: Peer-to-peer lending), new legislation will be introduced to allow individuals who make loans through peer-to-peer (P2P) platforms to offset bad debts arising against the interest they receive from P2P loans when calculating their taxable income. These changes will have effect for loans made from 6 April 2015. This measure will not be included in the first (pre-general election) Finance Bill of 2015. Depending on the outcome of the general election on 7 May 2015, it may be included in a future Finance Bill, with draft legislation currently planned to be published in 2015.

For information on regulation of P2P lending, see Article, Crowdfunding: regulating peer-to-peer and peer-to-business lending.

(2015 Budget Report, paragraph 2.89.)

Taxation of banks and finance transactions

Withholding tax exemption for private placements

As announced in the 2014 Autumn Statement (see Legal update, 2014 Autumn Statement: key finance announcements: Withholding tax exemption for private placements), legislation will be introduced in the first (pre-general election) Finance Bill of 2015 to enable regulations to be made providing an exemption from the duty to deduct income tax from interest paid on unlisted securities known as qualifying private placements. As part of the March 2015 Budget, it was announced that the primary legislation enabling this change (see Legal update, Draft Finance Bill 2015: implications for finance lawyers: Withholding tax exemption for private placements) will be amended to remove a condition relating to the minimum term of the security. The power to make regulations will have effect from Royal Assent, and the regulations will be laid later in 2015.

(2015 Budget Report, paragraph 2.130.)

Repeal of late-paid interest rules

As part of the review of the legislation on corporate debt announced at Budget 2013, the government will repeal rules concerning loans made to UK companies by a connected company in a non-qualifying territory.

For background information on this measure, see Legal updates, 2014 Autumn Statement: key finance announcements: Restriction of late paid interest rules and Draft Finance Bill 2015: implications for finance lawyers: Restriction of late-paid interest rules.

(2015 Budget Report, paragraph 2.137.)

Loan relationships and derivative contracts

Following the review announced at Budget 2013, the government will make wide-ranging changes to update, simplify and rationalise the legislation on corporate debt and derivative contracts. These will include a clearer and stronger link between commercial accounting profits and taxation, basing taxable amounts on items of accounting profit or loss. It will also include introduction of a new relief for companies in financial distress and new rules to protect the regime against tax avoidance.

As part of the March 2015 Budget, the government confirmed that it intends to proceed with its reform of the loan relationships and derivatives rules and that its proposed measures are (presumably, substantively) unchanged from those that were announced in the 2014 Autumn Statement and set out in draft legislation that was published a week later. However, these measures will not be included in the first (pre-general election) Finance Bill of 2015. Depending on the outcome of the general election on 7 May 2015, they may be included in a future Finance Bill.

For more information, see Legal update, March 2015 Budget: key business tax announcements: Reform of corporate debt and derivatives rules.

For background, see Legal updates, 2014 Autumn Statement: key finance announcements: Taxation of corporate debt and derivative contracts and Draft Finance Bill 2015: implications for finance lawyers: Loan relationships and derivatives.

For information on the taxation of derivatives generally, see Practice note, Derivatives: tax.

(2015 Budget Report, paragraph 2.193.)

March 2015 Budget: implications for finance lawyers | Practical Law