Tax cut to boost SMEs

THE Chancellor took significant steps to prove the coalition government is backing British business, with the biggest tax cut of the Budget aimed at SMEs.

In recognition of the fact that the cost of employment can be a burden for small businesses he announced what he said was the largest tax cut in the whole budget: axing employer National Insurance Contributions for the first £2,000.

He said the move would mean that a third of all employers in the country will “pay no jobs tax at all” in a move clearly aimed at encouraging small and micro businesses to grow and take on staff.

He said the move meant a business could employ someone at £22,000 a year or four people ion minimum wage and pay no tax at all.

“Private sector employment has been growing more quickly in the North East, North West and Yorkshire than in the rest of the country,” he added.

In another significant move that will prove a fillip to large and small businesses alike he pushed the cut in corporation tax – already due to fall to 21% next year – by a further 1% to 20% in April 2015.

“Britain is moving to low and competitive taxes,” he said.

Coverage of the Budget is brought to readers of TheBusinessDesk.com in partnership with Ernst & Young.

Martin Portnoy, tax partner at Ernst & Young in Manchester, said of the announcement: “By confirming that the UK corporate tax rate will drop to 20%, the Chancellor has delivered the ambition he set out in the last Budget. The UK’s tax regime is already attracting more jobs and investment to our shores, and this latest step reinforces the message that Britain is open for business.

“Combined with confirmation of the GAAR, and the UK’s commitment to participating in the OECD’s project on international taxation, the Chancellor is making it clear that the UK is a competitive place to do business but that he expects all parties pay their fair share.

“Clients have been telling us that the UK’s tax regime is an asset, but 67% of the tax professionals we surveyed prior to the Budget said that uncertainty created by the fair tax debate is a deterrent to increasing the level of their activities here. The Chancellor’s Budget speech today will hopefully have helped to address some of these concerns.”
 
Other major measures impacting business were:

-Tax relief to encourage investment in social enterprises

-Stamp duty cut on shares traded on markets like AIM

-Growth vouchers for small firms seeking advice on how to expand

-Seed Enterprise Investment Scheme, offering incentives to invest in start-ups, CGT holiday extended

-Double to £10,000 the tax free incentives that employers can offer to staff, for things such as commuter season tickets

-R&D tax credits increased to 10%

-Capital gains tax relief for the sale of businesses to employees

Reacting to the measures, membership organisation the Federation of Small Businesses said it was a budget to restore confidence and growth for small businesses.

John Walker, national chairman for the Federation of Small Businesses, said: “The FSB asked for a budget for small businesses and this is what has been delivered. This Budget opens the door for small firms to grow and create jobs. The Chancellor has pulled out all the stops with a wide-ranging package of measures to support small firms.”

He added:  “The National Insurance Contributions (NICs) cut goes beyond what we were asking for and we are pleased to see the 3p fuel duty rise due in September completely scrapped. We now look forward to hearing details on how the government intends to take forward the Business Bank that will help provide much needed access to capital for small firms.”
 
However, Lisa Conmy, head of SME Business Services at Pannone, said the Budget will not significantly improve the key issues of lack of funding and red tape that are hampering the growth ambitions of SMEs.

“Apart from the extension of CGT for investment into SEIS and abolishing stamp duty on shares traded on growth markets such as AIM, there is little to provide optimism. To help SMEs grow, the Chancellor needed to take decisive action not tinker around the edges,” she added.