By Shimon Shaw
The chancellor stood up for what many will have considered to be a very progressive Budget. His stated aims were definitely things that most businesses could get on board with: simplicity, certainty, making the UK more competitive and helping small businesses.
Some of the headlines, which will be of particular importance to SMEs are:
This is probably the most important measure for companies. Legislation will be introduced in Finance Bill 2011 to reduce the corporation tax main rate by an additional one per cent on top of the four annual reductions announced in the June Budget 2010.
The June Budget 2010 announced four annual one per cent drops in the CT main rate from 28 per cent for the Financial Year beginning April 2010 to 24 per cent for the Financial Year beginning April 2014.
The main rate for the Financial Year beginning April 2011 will now drop by 2 per cent to 26 per cent to be followed by three further one per cent cuts to 23 per cent by the Financial Year beginning April 2014.
This relief reduces CGT to 10% on gains resulting from the sale of certain business assets. Most importantly this frequently applies on the sale of shares in trading companies where the seller has owned 5% of the shares for a year. The current limit for this is £5m of gains over a lifetime, and the chancellor has increased this to £10m.
Merger of National Insurance and Income Tax
The dual system is simply an anachronism and wastes time and money in extra compliance, since in reality these are both taxes on income. Over the next few years there will be a consultation process to ensure that no-one loses out, but we now know that ultimately NICs will disappear and the headline rate of income tax will increase to reflect this.
There will be 21 new Enterprise Zones over the UK, one of which will be in London. There will be up to 100% business rates relief in these areas. There will also be, in a limited number of cases, enhanced capital allowances to support areas where there is a strong focus on high value manufacturing.
Small business rate relief
The SBRR holiday will be extended by one year from 1 October 2011.
There were several measures announced, which will be of benefit to those seeking to obtain planning consent especially in brownfield areas.
Enhanced capital allowances scheme for energy saving technologies — The energy-saving enhanced capital allowance scheme will, subject to State aid
approval, be updated during summer 2011. The main change includes the addition of a new technology-efficient hand dryers.
Research and Development tax credits for SMEs
Subject to State aid approval, legislation will be introduced in Finance Bill 2011 to increase the rate of the additional deduction for expenditure on research and development (R&D) for companies that are small or medium sized enterprises (SMEs) from 75 per cent to 100 per cent from 1 April 2011, giving a total deduction of 200 per cent.
Shimon Shaw is a Solicitor at Matthew Arnold & Baldwin LLP