Budget 2005 - Businesses could lose out, despite "neutral" appearance

Businesses that saw the Chancellor's Budget speech yesterday as a lukewarm affair that's unlikely to do much to help or hinder them should think again, warns PKF accountants and business advisors.

The reduction of regulation agencies dealing with UK businesses from 35 to just nine sounded like a sensible move, designed to decrease the worryingly large red tape burden for companies. But the massive changes this will involve could cause short-term chaos for many businesses as rules will inevitably change, new people will take on existing responsibilities and communication channels will be revamped.

Toby Stephenson, PKF partner for SMEs, said: "Businesses will be faced with a huge overhaul in the way they deal with Government agencies and no one really knows how the pieces of this new jigsaw will fall into place. By sharing information, the agencies will be able to check more easily under more criteria when investigating a company – it could even result in a bigger tax take for the authorities.

"It's imperative that business owners ensure they are keeping copies of all documentation relevant to these agencies, so they are prepared when dealing with new authorities and avoid problems caused by any potential loss of paperwork or confusion. If any business makes a mistake, it will be put onto a 'risk list' and be targeted by the authorities, so getting it right now is even more important than ever to avoid problems and fines."

Gordon Brown failed to mention the abolition of the current exemption from stamp duty land tax on commercial properties in disadvantaged areas during his speech, but PKF warns that this change, found in the small print of his Budget, and which is effective from 17 March, will prove unpopular.

Toby Stephenson said: "This reversal of a previous Gordon Brown incentive will do nothing to encourage investment in some of the poorest areas of the country."

Enterprise culture was also hit by a change to the tax treatment of intangible assets. Research and development work carried out in the UK on an idea owned abroad, will now render the intangible asset liable to UK tax when it is sold.

Toby Stephenson said: "This is a clear disincentive to carry out research in the UK."

He added: "The Budget's emphasis on encouraging enterprise values among school children and making the UK a more entrepreneurial place is admirable, but the Government needs to support this. Tax incentives would have played a bigger role in encouraging enterprise in 2005 and we are all left with the feeling that an opportunity has been missed here to really give UK businesses a helping hand."

Anyone purchasing a commercial property from tomorrow:

Value of property
Stamp duty land tax

£150,000 to £250,000
1%

£250,000 to £500,000
3%

£500,000 upwards
4%