Business world welcomes "no pain, no gain" Budget
Business groups have generally welcomed the measures contained in the Emergency Budget. Although most people in the UK will be affected by the spending cuts and tax increases, small businesses seem to have been spared the pain which some experts have predicted.
Pleasant surprise for small businesses
FPB chief executive Phil Orford said: “I think many small business owners will be pleasantly surprised by today’s Budget.
“Not only did the Chancellor make all the right noises about supporting enterprise and smaller businesses, he backed it up with a number of crucial tax changes. “The 1% reduction in small companies’ tax is obviously more than welcome – it’s something we and the SME community have long called for. It also represents a 2% cut in real terms as the previous government had planned to increase small companies’ tax by a further percentage point.
“The rise in CGT had proved controversial with business owners ever since the idea was first put forward, but the 28% rate is a gentler increase than many people were expecting. More importantly, the rise in the entrepreneurs’ relief threshold to £5 million is more than we could have hoped for and it should ensure that most small business owners aren’t penalised too heavily when they come to sell their companies.”
"The moves to limit rises in National Insurance, introduce NI exemptions for some new employers and raise the income tax threshold were also positive, even though they were watered-down from the Conservatives’ original pre-election promises.
“What we need now is are some guarantees on how the white paper on local economic growth Mr Osborne mentioned will focus on innovation and jobs in regions that are likely to be affected by public sector job cuts.
“We will also be lobbying the government to make sure the ‘fuel price stabilizer’ Mr Osborne referred to becomes a reality. Extortionate petrol and diesel prices represent a huge inflationary problem for smaller firms and could threaten recovery if left unchecked.”
Chas Roy-Chowdhury, head of taxation at ACCA, commented:
“The UK has been living beyond its means, but the Chancellor’s solution is an exceptionally tough one. The UK is the proverbial teenager waking up the morning after the night before: a raging headache, dehydrated, with mum and dad just arriving home to find the house wrecked. UK public spending will be grounded for at least the next parliament.”
“The state of the nation’s finances and the Coalition agreement means that some key Conservative and Liberal Democrat policies have been shelved,” continued Mr Roy-Chowdhury. “However, important policy promises remain: CGT is up, while tax credits for the rich have been scrapped.”
“This Budget will cause pain, but some parts of it will do so unintentionally. I’m disappointed that there has been no movement on simplifying the tax system – some measures, such as the regionalisation of National Insurance Contributions, could confuse issues for small businesses struggling under the burden of the system,” added Mr Roy-Chowdhury.
Disappointment for some over VAT?
Expressing his concern over the VAT rise to 20%, Philip White, Chief Executive of Syscap, the independent finance provider, said:
“The rise in VAT is going to exacerbate the cashflow problems already facing many businesses.”
“At the same time the decision to raise VAT has been made, it is quite clear that the “Time to pay” scheme, conspicuous by its absence from the budget statement, is being wound down.”
“This will be a huge source of disappointment to businesses who were seeking reassurances on its future.”
“Businesses cannot rely on HMRC for a helping hand with VAT payments anymore – this means businesses will have to seek alternative funding arrangements to pay their VAT bill.”
Encouragement for economic growth
Pernille Bruun-Jensen from Intuit UK said:
“Prior to this announcement George Osborne, the new Chancellor, has publicly pledged support for the private sector and today’s emergency budget has seen taxes being reduced and red tape lifted to further encourage economic growth.”
“With this in mind Small Business Britain now needs to make sure they have the agility to succeed in this changing environment. One of the most basic, and important, ways to do this is for our shopkeepers and business owners to ensure that they have crystal clear insights into the finances of their business. Not only will this help them stay on top of cashflow, a primary concern for most small businesses, it will also set them up to make the most of today’s announced changes to the VAT and Corporation Tax rates.”
Posted June 23, 2010
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