Despite a lot of hype and a considerable amount of expectation that this year’s Budget would be one that would help business, there was very little in it for SME businesses to get excited about.
As expected, the Chancellor has announced a reduction in the rate of corporation tax on company profits to be implemented from next month; but the cut was not as substantial as had been predicted by some and is of little benefit to smaller firms. The rate will be reduced by 1% to 24% from next month, but this is only paid by companies with profits of at least Â£1.5m a year (this is already reduced by marginal relief for those with profits between Â£300,000 and Â£1.5m). There will be a further reduction to 22% by 2014.
John Longworth, director general of the British Chamber of Commerce said: “The chancellor’s commitments to contain the deficit and reduce corporation tax will be welcomed warmly by business. However, many SMEs will feel the measures overwhelmingly benefit the biggest businesses. While there is a 1% cut in corporation tax, companies will still be hit with a 5.6% rise in business rates from April.”
A simpler tax system will be introduced from April 2013 for small businesses with a turnover of up to Â£77,000. The proposal is they will be taxed on a ‘cash accounts’ system removing some of their administrative burden and costs. Businesses will be able to grow within the scheme until their receipts exceed Â£150,000 before they will have to switch to normal tax rules.
The Government is also considering the introduction of Enterprise Loans for young people looking to start their own business. This scheme will work in a similar way to the UK student loan scheme, but further details are yet to be announced. The model is expected to work in a similar way to that currently promoted by Sir Richard Branson.
However, there were no new incentives introduced today to encourage businesses to employ young people, as had been widely anticipated and the cuts which many thought may be introduced to National Insurance for either new businesses or businesses taking on new employees also failed to materialise.
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