Swindon Business News has teamed up with leading independent chartered accountants Monahans to cover the 2011 Budget.
Chancellor George Obsorne put business at the heart of his Budget today with a pledge to make the UK the best place in Europe to start, finance and grow a business while fuelling growth in the wider economy.
Measures aimed at helping small firms include a 2 per cent cut in Corporation Tax in April, against the 1 per cent as previously planned, scrapping £350m of red tape and freeing firms employing fewer than 10 people from new regulations for three years.
Mr Osborne also extended the business rate relief holiday for small firms for a further year and increased research and development tax credits to 200 per cent with a pledge to further extend them to 225 per cent.
Good news for Swindon included a commitment to re-double the rail line to Kemble and a further boost in apprentice numbers – vital to the town as it aims to overcome a large rise in youth unemployment.
But the Chancellor had to deliver the Budget against a backdrop of a sluggish economy, rising inflation and weakening tax revenues and he had to admit that the forecasts are not good – the economy is now expected to grow by just 1.7 per cent against an expected 2.1 per cent this year while inflation is likely to remain stubbornly at between 4 and 5 per cent.
The biggest surprise of his speech was the 1p cut in fuel duty from 6pm today, which along with the widely-expected delay of next month’s 4p rise until next year, was aimed squarely at helping hard-pressed motorists and the haulage industry. These measures will be paid for by a £2bn tax raid on the oil industry.
Having opened his Budget by proclaiming: “Today’s Budget is about reforming the nation’s economy, so that we have enduring growth and jobs in the future,” he ended it by saying he had “put fuel into the tank of the British economy”.
Dominic Bourquin, tax specialist at Monahans chartered accountants, said that overall it appeared to be a positive Budget for business.
“The Chancellor announced a further 1 per cent cut in the main rate of corporation tax to 26 per cent from April,” he said. “This, along with an extension to the business rates holiday for small businesses to October 2012, the scrapping of £350m of business regulations and increased small companies’ R&D allowances to 200 per cent and then to 225 per cent gives us a positive outlook for business.
“Also, anyone looking to sell a business will benefit from a doubling of the entrepreneur’s relief lifetime allowance to £10m, potentially saving them up to £1.8m in tax.”
Jonathan Payne, senior partner at law firm Thrings, added: ”It is clearly a Budget designed to help small and medium enterprises to help the economy. Welcome reductions in the rate of Corporation Tax, a doubling of entrepreneurs relief to £10m and significant increases in the Enterprise Investment Scheme should all help investment in business.
“The creation of further apprenticeships and an extension of the work experience scheme should also help our manufacturing base as well as going a small way to reduce the alarming rises in youth unemployment.”
Gary Mealing, president of Swindon Chamber of Commerce, welcomed the business-friendly measures, particularly those cutting small firms free from regulation.
“I’m pleased with fuel duty reductions and the commitment to re-double the Swindon-Kemble line but the real problem is the cost of fares,” he said.
“The economic outlook also means that, however much more the Chancellor would like to do to help small businesses, his hands are tied.”
For Sara Tye, owner of specialist public relations agency RedHeadPR, the highlight of the Budget was the 2 per cent cut in Corporation Tax and the ambition to make British companies the lowest taxed of the G7 nations.
“This is an aggressive move to increase the UK’s international competitiveness. And very welcomed,” she said.
The three-year exemption for small firms from new business regulations was “a nice touch” but had not been backed up with details of how these businesses would really benefit.
“The fuel duty reductions are unlikely to make a significant difference to many motorists – even less to businesses,” Sara added. “This is just not enough to help businesses over the next six months trade while keeping costs down.”
Chris Elias, commercial director, Swindon from Barclays Corporate said: “Corporation Tax, which was due to fall by 1pp to 27 per cent next month and will now be cut by 2p, is a good news story for businesses, particularly as it is going to be offset by a raft of measures covering tax avoidance, evasion and administration rather than a tax increase elsewhere.
“Overall the measures that will have most impact on Swindon businesses and consumers are largely fiscally neutral. Therefore according to the Barclays Capital economics team, at first sight the Budget seems unlikely to lead to any material change in the outlook for both UK economic growth and inflation, with May still the most likely month for the first MPC interest rate increase – although heightened uncertainty about global activity following the recent oil price rise and soft indicators of consumer demand mean this may be delayed.”
Budget 2011 – At a glance
The economy
• Growth forecast cut from 2.1 to 1.7 per cent for 2011, and from 2.6 to 2.5 per cent for 2012
• Inflation expected to remain between 4 and 5 per cent this year
Business taxes and regulation
• Corporation tax to be cut by 2 per cent instead of 1 per cent from next month
• Consultation to start on merging Income Tax and National Insurance
• 43 complex business tax reliefs to be scrapped, and £350m of red tape to be scrapped
• No new regulations for firms with fewer than 10 staff for the next three years
• 15 per cent increase in the availability of credit for small businesses
• Business rate relief holiday extended for an extra year
• Small firm’s R&D tax credit to be increased to 200 per cent this year and 225 per cent next year
Fuel and Transport
• 1p reduction in fuel duty from 6pm today
• Fair fuel stabiliser introduced to be funded by £2bn tax raid on oil industry
• 4p Fuel duty escalator delayed for a year, then scrapped
• Commitment to the re-doubling the Swindon to Kemble rail line
• Vehicle excise duty increased by inflation and frozen for Heavy Good Vehicles
• £100m for repairing potholes
Skills
• Funding for 40,000 more apprenticeships for young people, taking the total to 250,000
• Funding for 24 university technical colleges
Enterprise
• Creation of 24 Enterprise Zones throughout the UK
• Planning system to be reformed and simplified to encourage growth and job creation
• Improvement in Intellectual Property regime to boost the creative sector
• Nw measures to help exporters
Environment
• Commitment to put Britain at forefront of low-carbon intiatives
• Green Investment Bank to have access to £3bn of funds
Personal taxation and duties
• No personal income tax increases
• Further £630 increase in personal tax allowance to £8,015 in April 2012
• Tougher measures to clamp down on tax avoidance
• No change in alcohol duties
• Tobacco duty up by 2 per cent above inflation
• Air passenger duty extended to private jets and to be reviewed
Housing
• Government-backed shared equity scheme for 10,000 first time buyers
