A summary of the key changes for small firms

The Chancellor’s Budget Report this week delivered the disappointing news that growth forecasts are set to be revised down from 1.2% to 0.6% since the Autumn Statement – but the Chancellor also outlined a number of plans to support small and growing businesses to boost growth in the new year.

MyBusiness has taken a closer look at the Budget Report and has outlined the key changes which may be set to affect your business, as well as reaction from business owners to the plans.

Tax Cuts

  • The government is set to reduce the main corporate tax rate by 1% in April 2015, bringing the rate down to 20% – the joint lowest among G20 countries.
  • From April 2013 business owners will benefit from a 10% ‘above the line’ R&D credit.
  • Business owners who purchase the lowest emission vehicles will be rewarded with a 100% capital allowance.
  • The Chancellor has also announced a crackdown on tax avoidance schemes.
  • The planned hike in fuel duty has been scrapped.

Entrepreneur and investor James Caan commented: “The cut in Corporation Tax to 20% means we have one of the lowest in Europe. This is encouraging for more companies to do business in the UK.”

Entrepreneur and investor Chris Ingram was less enthusiastic, however, commenting that “the corporation tax rate cut is a nice-to-have that won’t have any short-term benefit at all”.

Managing director of removals firm Bishop’s Move Alistair Bingle was understandably enthusiastic about the freeze on fuel duty, commenting: “This is fantastic news for businesses that rely on the roads to function and operate. A fuel duty hike would have had a severely negative impact on the haulage industry and a potential loss of jobs right down the ladder – the knock-on effect would have been unthinkable.”

Funding, grants and loans

  • The government is set to boost 11 industry sectors with £1.6bn total funding: automotive, agri-tech, professional business services, life sciences, aerospace, information economy, construction, education, nuclear, offshore wind and oil and gas. The sum will be split across these sectors over the course of 2013.
  • The government has also pledged to complete projects worth £2bn over the course of 2013, including completing major upgrades to road networks.
  • The Start-Up Loans Scheme, a funding initiative designed to support young entrepreneurs, received a £30 million boost in January as well as a rise in the upper age limit for eligibility from 24 to 30.

Investor support

  • Start-up investors are set to be rewarded with a further extension of Capital Gains Tax relief in 2013 and 2014 – as long as the companies are reinvested in that year or the following year through the Seed Enterprise Investment Scheme (SEIS).
  • The stamp duty on AIM shares will be abolished from April 2014.
  • To encourage private investment in social enterprise the government will provide tax relief to investors as part of next year’s Finance Bill.

Staff support

  • From April 2014 onwards all businesses in the UK will be eligible for a new Employment Allowance, which will provide business owners with £2,000 off their Employer National Insurance Contributions to encourage the hiring of new staff. This will mean every business will be able to afford to employ a further member of staff on a salary of £22K per annum, or four additional minimum wage workers.
  • The government has outlined plans for an employee shareholder status scheme, which will give employees the option of trading some of their existing employee rights in exchange for company shares worth a minimum of £2,000.
  • The government has launched a consultation on implementing Doug Richard’s report on apprenticeships in order to raise the profile and standards of apprenticeships.
  • Employers will be able to offer interest-free season ticket loans of up to £10,000 to employees.

Founder and CEO of Target Parking, Emma Sinclair, commented: “For small businesses, the cut in National Insurance is a significant help and certainly exceeded my expectations. £2,000 of an SME’s bill – or indeed the ability to hire someone on £22,000 or four people on the minimum wage and pay no ‘job tax’ – is a real advantage for a young businesses.”

Entrepreneur and investor Chris Ingram agreed: “Osborne’s proposal to reduce the cost of employing people through the Employment Allowance is the best initiative yet that this government has devised to support SMEs.”

Innovation support

  • The Small Business Research Initiative (SRBI), a scheme to encourage business innovation in technology, is set to receive a boost. Currently, firms compete for £40m worth of government contracts to develop technologies and this sum is set to be increased to £100m in 2013-14 and £200m the year after that.
  • The Technology Strategy Board will launch a fund of up to £15m to support the digital content production industry.
  • From April 2013 the government will provide £140m in investment to support small and medium sized businesses looking to export and receive international investment.

Despite the boost to the SRBI many small business owners were left disappointed with the lack of specific support for the tech industry. CTO of telecommunications firm Interoute Matthew Finnie commented: “It’s really disappointing that today’s Budget speech included no reference to the tech industry. Last year we were inspired with the promise of incentives to support UK tech investment, and a vow to make the UK the tech centre of Europe. But George Osborne was curiously quiet on this, leaving us to wonder what has happened to last year’s bold claims?”