Budget 2010: Is it good for business?

ALISTAIR Darling poured on the praise for business in his speech, but is this as much of a budget for enterprise as the Chancellor would have us believe?

A freeze on business rates, the doubling of the capital gains cap for entrepreneurs, and a promise to make government bodies pay their bills to SMEs on time presented the business-friendly face of the government.

But the Chancellor may have been looking to his announcement of a raft of measures to help SMEs gain greater access to finance and government contracts to get the greatest applause from business.

The two ‘nationalised’ banks, RBS and Lloyds, have, he said, been told to redouble their efforts to get business loans moving again. The pair will provide a total of £96bn of new business loans, nearly half going to SMEs.

And a new National Investment Corporation would bring together the government’s various business funding agencies under one roof to provide a ‘one stop shop’ offering a range of support packages totalling £4 billion. Part of this would be a new Growth Capital Fund of £200m to promote rapid growth and innovation.

Mr Darling promised to increase by 15% the share of procurement business that SMEs could expect from public bodies, which would benefit the sector by some £3bn.

Business rates would be cut for one year from October, benefiting more than half a million companies, he said.

For entrepreneurs, the feared slashing of the current £1m relief against capitial gains tax didn’t materialise, and was instead extended to £2m.

Daniel Hartland, tax partner at the Birmingham office of Grant Thornton said: “This Budget had several positives for entrepreneurs and their businesses.  Many businesses, despite low interest rates, continue to suffer financing issues as a result of the harsher banking environment we now find ourselves in.  
 
“The measures targeted at helping SMEs gain easier access to finance are very welcome and we wait with interest to see the detail of the proposal.  We are also very pleased to see an extension to the ‘time to pay’ scheme.  We have a number of clients who have benefited through agreeing payment schedules with HMRC where they have suffered short term financing issues due to the economic and banking environment and it is good to see this measure continued.  

“A surprise was the increase in the entrepreneur relief threshold from £1m to £2m.  That is, on a disposal of their interest in certain businesses individuals will be taxed at a rate of only 10% on the first £2m of capital gain.
 
Leading up to the Budget, it had been speculated that the mainstream capital gains tax rate would be increased from the current rate of 18%, so we are pleased to see that both the CGT rate has been unaltered and the benefits to entrepreneurs have increased.

“In addition, we are pleased to see that the Annual Investment Allowance, giving 100% relief for certain capital expenditure, has been doubled to £100,000.  It is noted, however, that businesses will no longer benefit from the 40% first-year allowance from the 1 April 2010.

“There is pain to come, of course, on the tax front with the small companies’ rate of corporation tax set to increase from 1 April 2011 by 1% to 22% and the proposed 1% increase in employers NI at the same time.”

Lord Kumar Bhattacharyya, head of Warwick Manufacturing Group, said the Budget had been excellent for both manufacturing and innovation.

He said: “Help for small businesses, funds for low carbon, boosts for start-ups, and the new university fund will all encourage the creation of jobs in the West Midlands.”

Richard Lambert, CBI Director-General, said: “There was more support for business than might have been expected, with a series of modest but helpful changes. The doubling of entrepreneurs’ CGT relief will help investment in small businesses and the extra money for science places at university will be welcomed by industry. However, it is the fiscal decisions over the next 12 months that will really determine the UK’s economic future.”

Richard Boot, West Midlands chairman of the Institute of Directors, said: “The Chancellor’s GDP forecasts are too optimistic and there is still no sign of a credible deficit reduction plan, but we certainly welcome the specific measures to support small and medium-sized businesses.”

Glyn Pitchford, Business Voice WM business representative on the Birmingham and Black Country City Region board, said: “I am pleased that Alistair Darling has kept open the opportunity of accelerated development zones to lever inward investment into the West Midlands.

“Business Voice WM has been campaigning for some time for ADZs. At long last Ministers are moving in the right direction, but business will only be happy once practical action from Whitehall to give the West Midlands a fighting chance to create local jobs really happens.”

But the continued prospect of a hike in national insurance payments, clampdowns  on tax avoidance and the gradual erosion of personal allowances for high earners also ensured the Budget scored the political points the government so desperately needs just weeks away from the General Election.

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