Budget blues for smaller business

INITIAL REACTIONS to Gordon Brown's third Budget were that - as far as business was concerned - it was "rather dull". But as time has gone on it has become clear that companies are going to pay a higher price than they had originally thought for the assistance the Chancellor says he is giving families and the low paid.

There continues to be a good deal of support for the measures aimed at supporting small and medium-size companies and enterprise.

For example, Sheena Sullivan, tax partner with accountants Pannell Kerr Forster, said: "The Chancellor was far more generous than we expected and he has put his money where his mouth is in encouraging an entrepreneurial culture in this country."

Geoff Edwards, tax partner with Grant Thornton, added that help in the form of research and development tax breaks would be welcome news to small innovative firms.

Alex Henderson, tax partner with Arthur Andersen, said that closer examination of many of the proposals showed them to be of minimal value. He was particularly disappointed by the suggestions that the rules surrounding such incentives as the enterprise management initiative and the relief for corporate venturing would be modelled on those for enterprise investment schemes and venture capital trusts, which were notoriously difficult to operate in practice.

The tax faculty of the Institute of Chartered Accountants in England & Wales went further. The proposals outlined by the Chancellor disguised the reality that for most small businesses this Budget would be of little or no help, pointing out the following omissions:

The Budget provided no incentives to the unincorporated businesses that make up the majority of UK enterprises;

The proposed all-employee share scheme would be impractical for entrepreneurs who will be unwilling to lose control of their fledgling enterprises by granting shares to all employees;

The proposed Small Business Service appeared to offer little more than is already being offered by such bodies as training and enterprise councils, and the small business advisory services;

The anti-tax avoidance measure targeting one-man companies would mainly hit the computer industry, contradicting the Chancellor's call to encourage the growth of information technology.

"This is a very disappointing Budget for the small and medium-size business," said Francesca Lagerberg, senior technical manager at the institute's tax faculty.

When it came to large businesses, feelings ran even stronger. One particular cause for concern was what one tax expert called "a swipe at the City" in the form of the proposals to end the VAT exemption for services that outsourcing specialists, such as EDS and Unisys, supply to financial companies.

Marc Welby, VAT partner in the financial services office of Ernst & Young, said that Customs & Excise's plan to charge VAT in relation to lending and card operations that banks and other financial institutions obtain from third parties could add hundreds of millions of pounds of extra costs, at a time when such organisations were struggling to compete and to overcome the effect of Britain being outside the single European currency.

Grant Thornton said the Budget threatened to make Britain a "nation of paper-pushers", pointing out that the combination of the measures and all the new legislation would result in a hectic and expensive year.

Mike Warburton, the firm's senior tax partner, said: "On top of having to cope with the introduction of the Working Time Directive, minimum wage, and the new corporation tax payment calculations, employers will now also have to contend with the National Insurance legislation and the commencement of yet another class of contribution - the new Class 1B, which takes effect on 6 April 1999."

Other accountants added that the increase in the number of tax bands was going to make life increasingly complicated for both individuals and their employers. "It puts a lot of extra burdens on companies," said a spokesman for PricewaterhouseCoopers.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers