Less red tape and a simpler taxation system

Small businesses received a boost in the shape of measures designed to promote investment and innovation, improve access to finance and encourage enterprise in disadvantaged communities.

The Chancellor said the measures to modernise and simplify the tax system, cut red tape and reduce the administrative burden on business would benefit up to 3.7 million firms in the UK. But accountants and small business lobby groups were sceptical about how much help Gordon Brown had really provided.

John Rayer, tax partner with BDO Stoy Hayward, said: "The tax measures introduced in the Budget do not appear to assist businesses in a significant way – mainly helping businesses at the margin of the VAT regime and extending the capital allowances on IT and other equipment."

In addition to encouraging innovation through the extension of 100 per cent first-year capital allowances for information and communication technology until April next year, Mr Brown announced a partnership with high street banks to provide advice and training for small businesses.

To improve access to finance, he said the UK would examine the scope for applying the highly successful US small business investment company model to the UK. He also announced enhancements to a range of initiatives including the enterprise investment scheme, venture capital trusts and the small business firms loan-guarantee scheme.

There is also a set of measures designed to help small and newly registered businesses reduce their VAT compliance costs by up to £1,000, improve cash flow and manage their entry into the VAT system.

The Government is investing £16m over two years to fund enterprise advisers to work with headteachers in about 1,000 secondary schools in deprived areas across the country. There is also a new £1m enterprise promotion fund, to support private and voluntary sector creativity in promoting awareness of enterprise in schools, business and the wider community;

Among other measures designed to tackle the red tape,more small companies will be eligible for less onerous accounting and reporting arrangements. More businesses will be allowed to benefit from the 40 per cent plant and machinery and 100 per cent information and communication technology investment allowances. These changes are part of a move to bring definitions of small and medium-sized companies in line with forthcoming EU law. In addition, the Government is introducing fairer and more consistent regulatory enforcement in the regions and revising and simplifying guidance on the Data Protection Act to help small businesses.

Dawn Primarolo, the Paymaster General, said: "A competitive business environment coupled with a modern tax system is vital to underpin strong economic growth in the UK. This Budget takes further steps to strengthen the business environment and to ensure that all regions in the UK are able to share in a dynamic and enterprising economy."

John Healey, the Economic Secretary, added: "For too long, inadequate access to skills, finance and new technologies has held businesses back from achieving their full growth potential. This Budget builds on existing measures to tackle these barriers to growth and takes further steps to cut red tape for small business. These reforms will help narrow the long-standing productivity gap with our competitors, and ensure that the UK remains one of the best places for businesses to start and grow."