Essex accountants CBHC analyse the Growth & Innovation Budget and shows us what it means for SMEs.
If George Osborne's words are to be believed, then 2011's March Budget is all about backing enterprise, kick-starting Britain's economy through the private sector and supporting the 'unsung heroes' of the UK economy - SMEs.
But is it all words and no action? Well, it's no surprise that important giveaways were lacking from this year's Budget - the UK growth forecast has been relegated to 1.
7% for this year and 2.
5% for 2012 and we're still facing a huge shortfall.
Instead, the chancellor is shifting money around - lowering taxes with one hand and raising them with the other.
Thankfully businesses, on the whole, are on the receiving end.
There were some excellent measures which are encouraging for SMEs and entrepreneurs, such as increasing Enterprise Investment Schemes relief, the decrease in corporation tax, raising the SME Research and Development tax credit and the various actions which will lighten the burden of red tape on small companies.
With this article, we'll be taking a closer look at the good, the bad and the ugly, and what opportunities there are for businesses.
Corporation Tax Significant news for business is the decrease in corporation tax by 2% from April this year, and 1% the following three years until it hits 23% - making this the lowest rate in the G7.
This is fantastic for attracting new investment into the UK, and as a strategy worked well to kick-start the Irish economy in the past.
However, this rate only applies to companies making more than £1.
5 million taxable profit -for SMEs corporation tax will only drop by 1% this April.
But it's a start, and certainly SMEs will experience a positive effect as the wider business community develops and the pace of investment picks up.
Rewarding enterprise and entrepreneurship Due to have a significant impact on SMEs are the reforms to the Enterprise Investment Scheme (EIS).
Investors will now be able to claim tax relief of 30%, rather than 20% of what they invest in qualifying companies, and the amount of investment that can attract upfront tax relief will double in 2012 from £500,000 to £1 million.
Furthermore, the qualifying company limits have been relaxed.
This will enable private investors to support new innovations and help larger SMEs to benefit from tax-efficient investment.
Business owners will also benefit from a doubling of the lifetime limit for entrepreneur's relief from £5 million to £10 million, meaning fewer will face large capital gains tax bills when selling their business.
This goes a long way to reward investors who support high-growth businesses, encouraging them to stay in the country, and should prove a big help to companies wanting to raise equity funding.
Lastly, Mr Osborne announced that the government has agreed with the banks a 15% increase in the availability of credit to SMEs - but, as always, decisions on whether to lend will still be made on an evaluation of risk.
To ensure you have the best chance of gaining funding, evidence of a well-managed business, including well-prepared accounts and a clear business structure and strategy, are essential.
We've had incredible success securing funding for our clients this way - throughout the downturn.
Lifting the red tape Small businesses (both new and established) with 10 employees or fewer will be delighted with the news that there is to be a three year moratorium on all new 'domestic regulations'.
By removing a lot of time-consuming bureaucracy, this will enable small companies to focus on growing, diversifying and employing - but of course only to a point.
Beyond companies of this size - which makes up a significant proportion of the UK economy - the red tape will be business as usual.
Overall, it's a step in the right direction, but we'd like to see the government extend the moratorium to larger SMEs in order to stimulate growth across the board.
On a positive note for everybody, tax appears to be on the road to simplification (although it's probably best to think of this road as the M25 at rush hour - expect long delays).
The Budget abolished 43 complex reliefs, removing over 100 pages from the tax code.
The government will also be consulting on merging the operation of National Insurance and Income Tax - a welcome move for employers as this would remove the unnecessary costs and complexity associated with administering two separate systems.
The chancellor has promised to do away with £350 million worth of specific regulations which tie up businesses in red tape, and implement in full Lord Young's health and safety recommendations.
Specifically welcomed is the crack down on no-win no-fee legal services which have preyed on employers for too long.
What a relief Particularly promising for many SMEs is the increased help they will receive under the Research and Development Relief scheme.
From April this year, companies will be able to set 200% of qualifying expenditure against tax bills, and 225% from April 2012, rather than the current 175%.
Those making a loss will also be able to recover qualifying expenditure.
This could free up cash flow, and enable companies who may have been putting initiatives on hold to get these projects up and running.
Make no mistake - R&D reliefs do not just apply to high-tech scientific developments and life-changing clinical breakthroughs but a whole raft of applications.
We've helped clients from printers to software companies gain research and development grants, so please contact us to find out if you could benefit.
The business rate holiday, which was due to end in October, is also being extended for one year.
For small businesses with a rateable value of less than £6,000 will not have to pay a penny for another year.
Again, this will help to improve cash flow and enable small investments.
Fuelling growth Well, maybe a little bit.
While cancelling next month's planned 4p rise in fuel duty and cutting it by 1p on Wednesday isn't going to change the world for SMEs (especially with the spiralling cost of fuel), it is a welcome move for those businesses which clock up a lot of miles.
Investing in industry This Budget has gone quite a long way in identifying specific ways to encourage export and investment in various industries.
Manufacturing, green companies, technology and science sectors were the main focus, but other industries, such as business and professional services and digital and creative also got a mention.
We've identified a few measures which show promise: Going Green The green industry offers immense opportunity for SMEs, and we're already seeing many of our clients involved either directly or in association.
To encourage further investment in the industry the 'greenest Government ever' is introducing a carbon price floor for the power sector, and also putting up to £3 billion of funds into its green investment bank to support investment low-carbon investment.
This is now going to operate a year earlier than expected in 2012, should be a valuable resource for SMEs in the region looking to expand their service offering in this growing market.
Construction Construction is big business around our region, so a £250 million commitment to help first-time buyers purchase new builds with a new shared equity scheme is incredibly welcome.
Regulations on planning are also set to relax, which should enable new projects to get up and running quickly and prevent unnecessary delays.
For example, the default answer to sustainable developments is going to be yes, the nationally imposed targets on the use of previously developed land will be removed and certain use class changes will be allowed.
Stamp Duty will now be levied on the mean value of the houses being purchased within a portfolio - not the bulk cost.
This will provide a significant boost to the sector by encouraging more professional landlords and larger institutional investors to grow their portfolios.
Manufacturing The fastest growing industry in the UK, manufacturing is making a big come back and the budget is certainly supporting it.
New export credits will be created to help smaller businesses, for example, and Britain's first Technology and Innovation Centre for high-value manufacturing will be launched (with a further nine to follow), which will develop the skills needed to take advantage of this industry.
To encourage manufacturers to invest in the latest machinery and technology, the limit on the capital allowances for short life assets will double from four years to eight years.
Capital allowances are the tax equivalent of depreciation, allowing businesses to write off the cost of capital expenditure on items such as plant and machinery against profits.
As such, they don't just apply to manufacturers - owners of commercial and even residential properties could also benefit.
Start, finance, grow Taking everything into account, this budget has been surprisingly supportive of the private business sector.
Although we would have like to have seen more measures taken to help SMEs in particular - after all, they make up over half of the UK economy - it's a start.
We're on our way.
If George Osborne's words are to be believed, then 2011's March Budget is all about backing enterprise, kick-starting Britain's economy through the private sector and supporting the 'unsung heroes' of the UK economy - SMEs.
But is it all words and no action? Well, it's no surprise that important giveaways were lacking from this year's Budget - the UK growth forecast has been relegated to 1.
7% for this year and 2.
5% for 2012 and we're still facing a huge shortfall.
Instead, the chancellor is shifting money around - lowering taxes with one hand and raising them with the other.
Thankfully businesses, on the whole, are on the receiving end.
There were some excellent measures which are encouraging for SMEs and entrepreneurs, such as increasing Enterprise Investment Schemes relief, the decrease in corporation tax, raising the SME Research and Development tax credit and the various actions which will lighten the burden of red tape on small companies.
With this article, we'll be taking a closer look at the good, the bad and the ugly, and what opportunities there are for businesses.
Corporation Tax Significant news for business is the decrease in corporation tax by 2% from April this year, and 1% the following three years until it hits 23% - making this the lowest rate in the G7.
This is fantastic for attracting new investment into the UK, and as a strategy worked well to kick-start the Irish economy in the past.
However, this rate only applies to companies making more than £1.
5 million taxable profit -for SMEs corporation tax will only drop by 1% this April.
But it's a start, and certainly SMEs will experience a positive effect as the wider business community develops and the pace of investment picks up.
Rewarding enterprise and entrepreneurship Due to have a significant impact on SMEs are the reforms to the Enterprise Investment Scheme (EIS).
Investors will now be able to claim tax relief of 30%, rather than 20% of what they invest in qualifying companies, and the amount of investment that can attract upfront tax relief will double in 2012 from £500,000 to £1 million.
Furthermore, the qualifying company limits have been relaxed.
This will enable private investors to support new innovations and help larger SMEs to benefit from tax-efficient investment.
Business owners will also benefit from a doubling of the lifetime limit for entrepreneur's relief from £5 million to £10 million, meaning fewer will face large capital gains tax bills when selling their business.
This goes a long way to reward investors who support high-growth businesses, encouraging them to stay in the country, and should prove a big help to companies wanting to raise equity funding.
Lastly, Mr Osborne announced that the government has agreed with the banks a 15% increase in the availability of credit to SMEs - but, as always, decisions on whether to lend will still be made on an evaluation of risk.
To ensure you have the best chance of gaining funding, evidence of a well-managed business, including well-prepared accounts and a clear business structure and strategy, are essential.
We've had incredible success securing funding for our clients this way - throughout the downturn.
Lifting the red tape Small businesses (both new and established) with 10 employees or fewer will be delighted with the news that there is to be a three year moratorium on all new 'domestic regulations'.
By removing a lot of time-consuming bureaucracy, this will enable small companies to focus on growing, diversifying and employing - but of course only to a point.
Beyond companies of this size - which makes up a significant proportion of the UK economy - the red tape will be business as usual.
Overall, it's a step in the right direction, but we'd like to see the government extend the moratorium to larger SMEs in order to stimulate growth across the board.
On a positive note for everybody, tax appears to be on the road to simplification (although it's probably best to think of this road as the M25 at rush hour - expect long delays).
The Budget abolished 43 complex reliefs, removing over 100 pages from the tax code.
The government will also be consulting on merging the operation of National Insurance and Income Tax - a welcome move for employers as this would remove the unnecessary costs and complexity associated with administering two separate systems.
The chancellor has promised to do away with £350 million worth of specific regulations which tie up businesses in red tape, and implement in full Lord Young's health and safety recommendations.
Specifically welcomed is the crack down on no-win no-fee legal services which have preyed on employers for too long.
What a relief Particularly promising for many SMEs is the increased help they will receive under the Research and Development Relief scheme.
From April this year, companies will be able to set 200% of qualifying expenditure against tax bills, and 225% from April 2012, rather than the current 175%.
Those making a loss will also be able to recover qualifying expenditure.
This could free up cash flow, and enable companies who may have been putting initiatives on hold to get these projects up and running.
Make no mistake - R&D reliefs do not just apply to high-tech scientific developments and life-changing clinical breakthroughs but a whole raft of applications.
We've helped clients from printers to software companies gain research and development grants, so please contact us to find out if you could benefit.
The business rate holiday, which was due to end in October, is also being extended for one year.
For small businesses with a rateable value of less than £6,000 will not have to pay a penny for another year.
Again, this will help to improve cash flow and enable small investments.
Fuelling growth Well, maybe a little bit.
While cancelling next month's planned 4p rise in fuel duty and cutting it by 1p on Wednesday isn't going to change the world for SMEs (especially with the spiralling cost of fuel), it is a welcome move for those businesses which clock up a lot of miles.
Investing in industry This Budget has gone quite a long way in identifying specific ways to encourage export and investment in various industries.
Manufacturing, green companies, technology and science sectors were the main focus, but other industries, such as business and professional services and digital and creative also got a mention.
We've identified a few measures which show promise: Going Green The green industry offers immense opportunity for SMEs, and we're already seeing many of our clients involved either directly or in association.
To encourage further investment in the industry the 'greenest Government ever' is introducing a carbon price floor for the power sector, and also putting up to £3 billion of funds into its green investment bank to support investment low-carbon investment.
This is now going to operate a year earlier than expected in 2012, should be a valuable resource for SMEs in the region looking to expand their service offering in this growing market.
Construction Construction is big business around our region, so a £250 million commitment to help first-time buyers purchase new builds with a new shared equity scheme is incredibly welcome.
Regulations on planning are also set to relax, which should enable new projects to get up and running quickly and prevent unnecessary delays.
For example, the default answer to sustainable developments is going to be yes, the nationally imposed targets on the use of previously developed land will be removed and certain use class changes will be allowed.
Stamp Duty will now be levied on the mean value of the houses being purchased within a portfolio - not the bulk cost.
This will provide a significant boost to the sector by encouraging more professional landlords and larger institutional investors to grow their portfolios.
Manufacturing The fastest growing industry in the UK, manufacturing is making a big come back and the budget is certainly supporting it.
New export credits will be created to help smaller businesses, for example, and Britain's first Technology and Innovation Centre for high-value manufacturing will be launched (with a further nine to follow), which will develop the skills needed to take advantage of this industry.
To encourage manufacturers to invest in the latest machinery and technology, the limit on the capital allowances for short life assets will double from four years to eight years.
Capital allowances are the tax equivalent of depreciation, allowing businesses to write off the cost of capital expenditure on items such as plant and machinery against profits.
As such, they don't just apply to manufacturers - owners of commercial and even residential properties could also benefit.
Start, finance, grow Taking everything into account, this budget has been surprisingly supportive of the private business sector.
Although we would have like to have seen more measures taken to help SMEs in particular - after all, they make up over half of the UK economy - it's a start.
We're on our way.
Source...