Companies expected to benefit from 2011 Budget

Measures announced in the Chancellor’s 2011 Budget are being implemented to help to facilitate growth amongst the struggling UK SME sector as the economic recovery continues to take shape.

The headline changes announced on 23 March include a reduction in corporation tax, a three-year freeze on new regulations for small businesses, the creation of 40,000 new apprenticeships, and the removal of large amounts of punitive legislation. The simplification of tax reporting systems, and the controversial 1p cut in fuel duty and the accompanying ‘fair fuel stabiliser’ were also announced.

In a move to aid research and development more tax credits, and doubling the rate of Entrepreneurs’ Relief to £10 million have also been outlined.

Many have said that this Budget is strongly geared towards reducing the legislative and financial pressures on UK SMEs in order to support growth in the wider-UK economy. While it will take time to understand how these measures will ultimately impact businesses in practice, they should go some way to helping companies operate more efficiently. Taking into consideration that UK SME’s account for more than half of the UK private sector workforce, and with the mounting jobs pressure from losses in the public sector, whether the measures will result in growth, or stem the rate of a likely double dip is anyone’s guess.

A key move is the proposed simplification of company tax reporting which, it has been suggested, has become too exacting and exhaustive. In a similar vein, the Government’s efforts to reduce red tape, in particular surrounding health and safety, and discrimination legislation, will also be widely welcomed by companies.

Other changes, including the exemption of start-ups and companies with less than 10 employees from meeting new domestic legislation for the next three years, will greatly reduce the pressure on young companies against the uncertain if improving economic backdrop.

Despite the ‘positive measures’ outlined in the Budget, late payments and insolvent debtors remain a key concern in the current business environment and the Budget will do little in SME owner/manager’s minds to alleviating that fear.

Budget 2011: A snap shot for UK SMEs

1) Business Rate Relief holiday for small businesses extended for 12 months

2) The abolition of selected tax reliefs

3) Three year delay on the enforcement of new domestic regulations on companies with less than 10 employees

4) 21 new enterprise zones to be created, allowing start-up businesses in these areas tax relief and additional operation benefits

5) Entrepreneur’s Relief to double to £10 million from 6 April 2011

6) Increase in research and development tax credits for SMEs

7) Fuel duty cut by 1p per litre

and, the launch of the Startup Britain scheme to encourage UK entrepreneurship and 40,000 new apprenticeships to be created.

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