Budget 2011: Osborne targets UK as ‘location of choice’

CHANCELLOR George Osborne’s Budget has given entrepreneurs and wealth creators the clear message that the government is doing what it can to promote the UK as a place to do business, according to a senior figure at accountancy firm Ernst & Young.

But Neil Holyoake, tax partner at Ernst & Young in Leeds, said Mr Osborne had “raided the banks” to make his measures to cut corporation tax by 2% to 26% from April 1 and by 1% in each of the following three years a reality.

The bank levy rate is to be adjusted to offset the fall in corporation tax to ensure the sector doesn’t benefit from this change.

TheBusinessDesk.com’s Budget coverage is sponsored by accountancy firm Ernst & Young.

Mr Holyoake said: “The Chancellor’s message to entrepreneurs and wealth creators is that the UK is once again seeking to be welcoming. The changes to the tax regime for non domiciles will encourage investment in the UK and the prospect of the abolition of the 50p income tax rate is now clearly a short term possibility. Together these measures should help promote the UK as a location of choice.”

However, he added: “The Chancellor has once again chosen to raid the banks to pay for the cuts in corporation tax, repeating the approach he took at the Emergency Budget. By increasing the burden faced most by banks headquartered in the UK, the Chancellor continues to increase the incentives for banks to migrate.”

Mr Osborne today outlined plans to “fuel the tank of the British economy” as he announced a raft of measures to help families and boost business.

Mr Osborne announced plans to introduce enterprise zones, in cities including Leeds and Sheffield, cut corporation tax and slash £350m of red tape in a Budget which he said would help make Britain the “best place in Europe to start, grow and finance a business”.

In what Mr Osborne described as an “historic step”, consultations are to begin on merging national insurance and income tax.

Corporation tax is to be reduced by 2% from April 1 and by 1% in each of the following three years and the bank levy rate will also be adjusted to offset the fall in corporation tax to ensure the sector doesn’t benefit from this change.

Mr Osborne announced an increase in the income tax threshold to £8,105 from April 2012. Fuel duty will be cut by 1p per litre from 6pm tonight and mileage rates increased to 45p per mile.

A total of 21 enterprise zones, targeted at areas where the economy has struggled and offering tax breaks and discounts on rates, are to be introduced.

Emphasising the need for private sector growth and industries such as manufacturing helping to achieve that, Mr Osborne said the Budget “was one for making things, not making things up” and he said the coalition government wanted to encourage enterprise, export and investment.

Mr Osborne said the forecast for economic growth in 2011 had been downgraded to 1.7%, after figures showed a 0.6% contraction in the last three months of 2010.

Other highlights included an £200m extra to be invested in regional railways – including schemes in Manchester, which Mr Osborne said would speed up journeys between Leeds and Manchester; 40,000 new apprenticeships for young unemployed people; and an extra £2bn being provided for the Government’s Green Investment Banks, which will be introduced a year earlier than planned in 2012.

Mr Osborne described the existing 50% personal top tax rate as a “temporary measure” but said it was not the “right time to remove it”.

He described small businesses as the “innocent victims of the credit crunch” and announced plans to introduce export credits to help SMEs, and £100m for new science facilities.

He doubled the size of entrepreneurs relief to £10m and increased the income tax relief for businesses to 30%.

Mr Osborne pledged £250m to help 10,000 first-time homebuyers purchase newly built flats and houses in England and increased the charge on ‘non-doms’ to £50,000 for those who have been in this country for more than 12 years.

Neil Holyoake, tax partner at Ernst & Young in Leeds, said: “It’s an encouraging budget for growth in the economy. The Chancellor has given away as much as he possibly can.

“And he has even found some giveaways where none should have been available. He’s encouraging further investment and business development in the UK.

“It’s a good Budget for entrepreneurism and business with changes to the EIS scheme, reduced corporate tax rates and changes to R&D as well as the announcement on enterprise zones.”