Corporation Tax Cut in “Budget for business”
A further cut in corporation tax was the main measure to help small businesses in the 2012 Budget.
Describing it as “unashamedly a Budget for business”, Chancellor George Osborne also announced new Enterprise Zones for Scotland, Wales and Northern Ireland and reiterated yesterday’s announcement of a new £20-billion National Loan Guarantee Scheme.
“This country borrowed its way into trouble,” he said. “Now we’re going to earn our way out.”
The Chancellor pledged to create an environment where:
“British businesses have the self-confidence to invest, expand, hire, innovate and be the best.”
Mr Osborne told the House that the Budget was being delivered against a backdrop of uncertainty in the UK and the eurozone generally. But there were “positive signs”, he added, citing the Office for Budget Responsibility’s upwardly revised forecast for the UK economy of 0.8% growth in 2012, 2% in 2013 and 3% in 2015.
2012 Budget: tax benefits for small businesses
The Chancellor promised to consult on a “radically simplified” turnover tax for the smallest businesses with a turnover up to the VAT threshold of £77,000. This single flat-rate tax would replace the multiple taxes businesses currently have to pay and would make filing tax returns “dramatically simpler for up to three million firms”.
Businesses paying corporation tax would see an additional cut of 1% to 24% from April this year. Further planned cuts will go ahead and bring the corporation tax rate down to 22% in 2014. The larger aim, the Chancellor stressed, was to bring small business tax, income tax and corporation tax into line at 20%.
Mr Osborne revealed that the individual personal allowance will increase by £1,100 to £9,205 from next April and leave “millions of working people” better off by £220 each year.
The 50p top rate of income tax, which has been accused of stifling entrepreneurialism, will also be reduced from 50% to 45% from April 2013. Research by HM Revenue & Customs (HMRC) found that the 50p rate raised just a third of the tax it was expected to and created a “massive distortion” in the tax take as high-earners sought to avoid paying it.
Research and development tax credits will be increased “above the line” from April 2013 and the Government will press ahead with a consultation on integrating income tax and National Insurance with details to be published next month.
“All of these tax reductions will help win business for Britain,” the Chancellor said. “We need to give Britain a modern tax system for the modern world.”
Finance 2012 Budget: finance and enterprise
Mr Osborne reiterated the new £20-billion National Loan Guarantee Scheme, through which five banks are making low-interest loans available to small firms, and promised to “expand” the Enterprise Finance Guarantee, currently a £2-billion scheme, to make funds available to small firms with no credit history or collateral.
The Chancellor also promised to increase the Finance Partnership by 20%. Announced last autumn, this will see a non-bank provider lending up to £1.2 billion to medium-sized businesses. Mr Osborne revealed that 24 bids to run the scheme had already been received, of which seven would be shortlisted.
Three new Enterprise Zones will be created in Scotland, in Dundee, Irving and Nigg, to join the 24 that are already up and running in England. One will be created in Wales in Deeside, while there are plans to create another in Northern Ireland. Start-ups in these zones will benefit from enhanced capital allowances.
In a bid to promote employee ownership and help start-ups “recruit and retain talent”, the Enterprise Management Incentive (EMI) scheme grant limit will be more than doubled to £250,000. EMIs offer tax-advantaged share options to employees.
The Chancellor also promised to “explore the idea” of enterprise loans for young people to help them start businesses. Along with the Youth Contract, the aim is to tackle the high rate of unemployment among young people.
2012 Budget: red tape and infrastructure
Sunday trading laws will be suspended for eight Sundays during the Olympics and Paralympics from 22 July. An overhaul of planning regulations, which would cut 1,000 pages of laws to just 50 and create a presumption in favour of sustainable development, will be published next week.
The Chancellor also promised to invest in “ultra-fast” broadband in ten UK cities and make £50 million available for smaller cities.
“We will earn our way in the world by saying to all businesses — large and small: we will provide you with modern infrastructure, growth-friendly planning rules and employment laws, the kinds of schools and universities and colleges our future workforce needs,” the Chancellor said.