By Daniel Hunter
More than a third (36%) of businesses surveyed believe that the measures in the March 2013 Chancellor’s Budget will drive economic growth. Crucially, the post-Budget survey of British business leaders by accountants and business advisers BDO LLP revealed that British businesses' hiring intentions may also be much improved.
Almost a quarter (23%) of business leaders say their business will consider taking on more employees as a direct result of the £2,000 Employers’ National Insurance Credit. This indicates that up to 240,000 new jobs could potentially be created by businesses taking advantage of the new credit.
The research also suggests a welcome reprieve for businesses, as a substantial 43% believe the Budget will help ease pressure on businesses across the UK. In addition, the Chancellor will have further cause for cheer as around two fifths (39%) believe the Budget will help make the UK a more competitive destination for international business investment.
However, when asked to consider the direct impact of the Budget on their own business, while a third (33%) of businesses think it will have a direct positive impact on their business, 50% disagreed, indicating that there is more work to be done by the Chancellor to convince businesses that his plans speak to their needs.
“While there is always a great deal of debate as to the overall impact of the Budget on businesses, this year we can identify certain areas where businesses have cause for cautious optimism and the Chancellor should be pleased with the result. However, he needs to go further to accelerate progress and ignite business confidence," Stephen Herring, Senior Tax Partner BDO LLP, said.
“The Chancellor may need to reduce the Corporation Tax rate beyond the 20% announced in the Budget to protect the UK’s ranking against its European and global competitors for foreign direct investment."
A potential stumbling block identified by businesses following the range of anti-tax avoidance measures announced in the Chancellor's Budget, is the lack of clarity on what constitutes tax avoidance. Following the Budget, the majority of businesses (62%) are not confident in defining what the Chancellor and HMRC consider to be unacceptable tax avoidance, as opposed to legitimate tax planning.
Stephen Herring continued: “An urgent task, but one that can be easily remedied, is clarifying the difference between tax abuse, aggressive tax avoidance, tax avoidance and authentic tax planning. The Chancellor ought to ask HM Treasury and HM Revenue and Customs to prepare a brief paper for him next week setting out a clear framework for these terms or he runs the risk of hampering growth as UK businesses struggle to navigate a confusing system and potential foreign investors look elsewhere for what they perceive to be a clear and welcoming tax system.”
Businesses have also identified areas where the Chancellor could go further in reforming the personal tax system. Looking to areas not covered in the Budget, a third (33%) of business leaders believe that Inheritance Tax is in need of pressing reform, while almost a quarter (23%) would say the same for Stamp Duty Land Tax.
Stephen Herring continued: “The unpopular Inheritance Tax and Stamp Duty Land Tax are the dogs that didn’t bark in this year’s Budget, despite a strong desire for reform. Tax payers understandably feel these are unfair levies, as both taxes are considered to be paid out of already taxed income, meaning an effective double tax. In addition, Inheritance Tax is excessively complex and could be replaced with little impact upon the tax collected, by, for example, the introduction of a Capital Gains Tax liability upon an individual’s death.”
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