Press Releases
March 2010
Don’t get too excited about the Budget
Essex-based firm of accountants, Rickard Keen, is advising people not to get too distracted by the positive-appearing announcements of this year’s Budget, and miss the plain and less appealing facts.
Alistair Darling dubbed his third Budget, and his last before the general election, as the ‘budget which would set out a route to long term recovery’ for the country’s weakened economy.
A fundamental feature of this plan is a package to increase investment in small and medium sized businesses.
To this end, the Chancellor announced a one year cut in business rates from October, ambitious plans to provide £2.5bn in support for small businesses to boost skills and innovation, and the doubling of the small firm investment allowance from £50,000 to £100,000.
Keith Bell, of Rickard Keen, said: “The Chancellor’s stated intention to support small and medium sized businesses is largely illusory. The cut in business rates is of course welcome, but it glosses over increases in other areas that are due to come in from April 1.”
Keith also feels that the doubling of AIA Capital Allowance, from £50,000 to £100,000, is of no great benefit to smaller businesses. He said: “Because of the loss of the 40% First Year allowance, and also because a struggling business has to spend £1 to save 20p, 40p or 50p in tax this can still leave them worse off.
“This is only an incentive to those businesses that have the money to spend in the first place, or are lucky enough to have the support of their bank.”
The surprise move in this year’s Budget was the decision to double the relief on capital gains tax for entrepreneurs, and all felt a sense of relief when Darling announced that there would be no change to the existing capital gains tax rate of 18%.
Other moves previously announced included the 50% tax rate increase on those who earn over £150,000 per year, the removal of the personal allowance for those on incomes exceeding £100,000, and restrictions on the amount that can be contributed into pension schemes for those on incomes of over £130,000.
Keith commented further: “If the CGT entrepreneur’s relief is designed to encourage the set up of new businesses which can then be sold and charged to a tax rate of 10%, it will contrast with established successful business people who will be paying 50% tax, having lost their personal allowances, as well as being unable to make adequate provision for their retirement through their pension funds.
“Although the Chancellor has made some announcements which may help SMEs in some ways, the devil is in the detail, and we shouldn’t be fooled by a few positives.”
For more information, contact Rickard Keen LLP on 01702 347771.
