By Emma Bailey
After last year's austerity budgets, this was a budget to show the world that "Britain is open for business."
A number of measures were announced that will be welcomed by the business community, including a further unexpected reduction in the rates of corporation tax, the broadening of the availability of enterprise investment scheme (EIS) and venture capital trust (VCT) reliefs and the increase in the lifetime limit for entrepreneurs relief.
George Osborne surprised business by announcing that, in addition to the already planned reductions in the rate of corporation tax, the rate would fall by a further 1% to 26% for the tax year commencing 1 April 2011, falling eventually to 23% in by the tax year beginning 1 April 2014.
Following on from the report of the Office for Tax Simplification, which recommended retaining and simplifying EIS and VCT reliefs so as to encourage investment in SMEs at a time when bank lending is in short supply, the changes announced by the Chancellor make the reliefs much more widely available.
In particular, from 6 April 2011, the rate of EIS income tax relief will rise to 30% (from 20% currently) and, from 6 April 2012, more companies will qualify for EIS/VCT investment and the amount that can be invested annually will increase. Consultation on further simplification is also promised, including on giving additional support through EIS for seed investment.
The Chancellor also announced that legislation will be included in Finance Bill 2011 to increase the lifetime limit on gains qualifying for entrepreneurs' relief from £5 million to £10 million with effect from 6 April 2011.
The proposed consultation on the alignment of income tax and NICs is also welcome (though it is recognised that any reform will take a number of years), as is the introduction of a statutory residence test (though we await further details). Much needed clarification is also given as to the operation of the disguised remuneration rules. Less helpful is the announcement that IR35 will be retained for personal service companies (though simplification and clarification is promised). And as expected, a raft of little used reliefs will be abolished which should reduce the compliance burden on companies.
Emma Bailey is a Partner at Fox Williams LLP.