Small Businesses: Entrepreneurs promised tax relief and less red tape

Measures aimed at boosting the UK's small business sector and encouraging innovation were at the centre of the Budget, the Chancellor claimed.

Alistair Darling reiterated his promise to offer entrepreneurial relief alongside the new rate of capital gains tax (CGT), but also promised to improve access to finance for small businesses.

The Small Firms Loan Guarantee – under which the Government underwrites a proportion of loans to businesses lacking collateral or a proven track record – will be increased by £60m this year and eligibility extended. The Chancellor has also added £30m to the available Enterprise Capital Funds, which has a further £150m earmarked for the next three years.

Tax relief on the Enterprise Investment Scheme and the Enterprise Management Incentive Scheme – both of which act as incentives to entrepreneurial outlay – is to rise by £100,000 and £20,000 respectively.

Business groups welcomed the measures. But their efficacy will depend on how they are put into practice, said Miles Templeman, director general of the Institute of Directors. "We need to feel that all the good stuff isn't then swamped by some other tax issue, like CGT," Mr Templeman said. "If the Government really means it, then the agenda must cover all aspects of policy."

Small business experts also warned that, while the Treasury has promised to look at ways of simplifying the taxation of small firms, the system remains complicated and expensive.

"Life as a small company is extraordinarily complex," said Steve Gilder, partner at PricewaterhouseCoopers. "There needs to be a clear direction on the principles to be achieved, not a knee-jerk, catch-all reaction to adverse developments."

The Budget also included non-financial measures aimed at the small business sector. To help cut red tape, Whitehall departments are committed to reduce their regulatory burden by 20 per cent by 2010. Specific proposals in the Budget include the possibility of "regulatory budgets", a review of existing legislation and consideration of whether small firms can be fully exempted from new requirements.

There are also plans to make the most of public sector procurement. As well as lifting restrictions on factoring and invoice discounting in public sector contracts, the Treasury is also looking at giving 30 per cent of government contracts to small or medium-sized firms within five years. A review will be led by Anne Glover, chief executive of the venture capital company Amadeus Capital Partners.

John Wright, national chairman of the Federation of Small Businesses, said: "We have been pressing for a long time for small companies to get a fair kick of the ball in relation to large public sector deals, not least because they can help the local economy."

The Chancellor is also committed to encouraging more female entrepreneurs.

The Budget includes a £12.5m capital fund for investment in women-led businesses, alongside plans for a nationwide media campaign and regional pilots of business centres to support female entrepreneurs. The funding was welcomed by the Women's Enterprise Task Force.