Budget: Chancellor announces VAT boost for small businesses

The Chancellor Gordon Brown announced during his Budget speech this afternoon that he was freezing Corporation Tax, Small Business Corporation Tax and Capital Gains Tax.

Mr Brown announced that more regulations and procedures would be earmarked for removal or reform, business experts would be involved in cutting further red tape and new procedures introduced to make it easier for small firms to compete for Government contracts.

He said he was publishing proposals for the creation of British Small Business Investment Companies - private-sector vehicles designed to inject new capital into small and medium-sized firms.

He would back-up the cut in small business tax by funding three tax reliefs and incentives to help companies in industrial and rural areas.

By raising the qualifying threshold to the maximum possible under EU law, a total of 3.7 million businesses will become eligible for 40 per cent investment allowances.

From tomorrow, firms with turnovers £56,000 or less will not have to register for, or pay, VAT.

"From tomorrow we will also abolish automatic fines for late payment of VAT for 200,000 more small businesses," he said.

He said 150,000 companies with turnovers under £1 million have been released from "burdensome audit requirements" and subject to consultation this summer, the Government planned to release thousands more.

Britain had agreed to submit an employment strategy to the EU and was also set to propose to Europe and the US ways to liberalise services and remove tariffs faster.

The Chancellor also used his Budget speech to confirm that he will publish his assessment of the five key tests on Britain's euro membership by the first week in June.

Mr Brown also announced he would abolish Bingo Tax on August 4, replacing it with a 15 per cent gross tax on bingo company profits.

Mr Brown added to incentives for small business creation in the UK's 2,000 most deprived areas. "More than 20,000 public sector jobs could be transferred out of London to thebenefit of the whole country", Mr Brown said.

An extension of regional science and industry councils is under consideration and a new on-line service, to give small businesses advice on training, is being examined.

Local authorities will share receipts from the creation of new businesses in their areas.