Small businesses unimpressed by Budget promises

There was little for small businesses in this year’s Budget as the Chancellor focused on helping families, pensioners and first-time homebuyers, ahead of the General Election.


There was little for small businesses in this yearÂ’s Budget as the Chancellor focused on helping families, pensioners and first-time homebuyers, ahead of the General Election.

There was little for small businesses in this yearÂ’s Budget as the Chancellor focused on helping families, pensioners and first-time homebuyers, ahead of the General Election.

In his speech Gordon Brown said that, since Labour had come to power in 1997, 300,000 more businesses had been created and 150,000 more people were now self-employed. But he had little to offer the 4,000 new businesses he said were starting up each working week.

The Chancellor said he was keen to support business innovation and research. As such he will ‘enhance the R&D tax credit for the mid-sized research company’ and guarantee that at least £100 million of public sector research contracts will go ‘to small technology-intensive companies’.

Regional development agencies have also unveiled a document, ‘High Growth Business Coaching’, to encourage more growing businesses to start up in the regions. To this end Gordon Brown wants to ensure that ‘by 2006 every school pupil has enterprise education’. He is also targeting ‘creative industries’ as a growth area.

Much of the pronouncements concerned efforts to chop red tape. This drive was headed by the unveiling of the Hampton Review, which the Government accepted, agreeing to implement the recommendations.

These will see the number of inspection agencies reduced and should see the lightening of administrative burdens small businesses face when collecting tax, by giving them just one point of contact with the combined Revenue and Customs Department.

70,000 firms now pay a flat rate of VAT. The Government wants to work with the Chambers of Commerce to push the take-up rate to all 600,000 companies eligible for this scheme.

Corporation tax has been frozen at the same rate as last year, but so have the levels when these rates apply.

However, Carol Undy, national chairman of the Federation of Small Businesses, remained sceptical, commenting: ‘Businesses have been promised bonfires of red tape in the past and they have never been ignited. Businesses are cynical because of past broken promises – 30 reports, seven white papers and two acts of parliament during the last 20 years alone.’

She was encouraged by the commitment to simplify payroll burdens though, saying: ‘At the 2004 budget, the Chancellor said that he accepted the case for the Inland Revenue paying the working tax credit directly to claimants. It was about time he announced the timetable for this change, and employers and employees alike will welcome the introduction of direct payment from November 2005.’

Carol Dempsey, partner at PricewaterhouseCoopers, was disappointed that the Inland Revenue had not reviewed the Share Incentive Plan, as promised when it was set up five years ago.

She said ‘the tax-approved limits under the plan, allowing employers to gift up to £3,000 of free shares to employees each year, are now looking somewhat outdated and due for an upwards review.’

Employers can give employees a small benefit though, by selling them their work computers or bicycles. Such transactions will now be exempt from tax.

(16/3/2005)

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