Budget Statement 2004: Summary of Small Business Announcements

Developing Better Regulation and Policy

Small businesses feel the weight of regulatory burden more acutely and it is essential that all new policies and regulations are designed and implemented in a way that minimises the burdens. The following further steps were announced in the Budget:

Tax credits: payments via employers

  • The government accepts the case, in principle, that the benefits to business justify moving to direct payment of the Working Tax Credit, reducing the cost of payroll administration and addressing a key area of business concern. The reform will be particularly valuable to the 1.2 million small businesses that stand to benefit. The Government will consult with employers on the detail of implementation.

Modernising VAT

  • The government has introduced a series of measures designed to help reduce the administrative burden and to ease the cash flow of small businesses. Budget 2004 announced further measures to help small and newly-registered businesses reduce their VAT compliance costs, including:
    • raising the VAT registration threshold from 1 April in line with inflation from £56,000 to £58,000, keeping 5,000 of the smallest businesses out of the VAT system; and
    • from 1 April, increasing the turnover ceiling for businesses wishing to use the simplified VAT annual accounting and cash accounting schemes from £600,000 to £660,000.

Better regulation

  • Budget 2004 also announced a consultation to enable VAT to be applied more fairly to purchases of land and property by charities.
  • For the first time, government departments this year are reporting on their regulatory performance – and the independent Better Regulation Task Force will publish its own analysis of these reports. Departments’ regulatory performance will be taken into account in the 2004 Spending Review.
  • In addition, the Government will now introduce new mechanisms for reducing the flow and improving the quality of regulation. In future, any regulatory proposal likely to impose a major new burden on business will require clearance from the Panel for Regulatory Accountability, chaired by the Prime Minister, based on a thorough impact assessment of the proposal agreed by the Cabinet Office Regulatory Impact Unit before the proposal is put to wider Ministerial approval.

Greater regulatory certainty

  • The government will consult next month with businesses on the feasibility of extending common commencement dates to other areas of regulation and tax. In parallel, the Department for Environment, Food and Rural Affairs will study the feasibility of extending the approach to environmental regulation.

  • After a consultation in August 2003, the Government has announced measures to ensure that the extension of the transfer pricing rules to transactions between related entities in the UK will not result in a disproportionate administration burden for smaller businesses.

Access to public contracts

  • The government is committed to encouraging small businesses to compete for contracts to supply the public sector. Alan Wood, Chief Executive of Siemens in the UK, is leading a review of UK businesses’ experience of accessing public contracts in other EU member states and will report in the summer.

National minimum wage

  • From October 2004, an increase in the adult and youth rates of the National Minimum Wage to £4.85 and £4.10 respectively, and the introduction of a National Minimum Wage for 16 and 17 year old workers.

Pensions simplification

  • The government is proceeding with its proposals for pensions simplifications set out in the December 2003 consultation document, replacing the eight current regimes with a single lifetime allowance on the amount of tax-privileged pension saving. In response to concerns expressed in the consultation, the Government will:
    • legislate in Finance Bill 2004 to implement the simplified regime in April 2006, allowing employers and providers sufficient time to fully implement the benefits of simplification;
    • set the lifetime allowance on introduction at £1.5 million to reflect an April 2006 implementation date;
    • to provide certainty, pre-announce the lifetime allowance for all years up to 2010 such that it increases steadily to £1.8 million in 2010; and
    • review the lifetime allowance level and indexation every five years, with the first review in 2010.

These seven core themes represent a strategic policy response to tackle the barriers faced by people across society who are interested in starting a business, growth barriers for existing small businesses, and specific barriers for disadvantaged communities and under-represented groups. They will enable the Government to focus its efforts on making a positive impact on small business during each key phase of its development.

Budget Statement 2004: Summary Small Business Statements – Crown Copyright © 2004-2012

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