SMEs should be among the biggest beneficiaries from the Government’s much-vaunted drive to slash red tape. Osborne said start-ups and businesses with fewer than 10 staff will be exempt from any new legislation for three whole years. He also launched a consultation about merging income tax and NI, which would certainly reduce the payroll burden for smaller firms – although the only catch is that we’re unlikely to see any concrete results for several years at best. All told, some £350m worth of regulations are apparently going to get the chop, though we’re not sure which yet; as Sage’s Brendan Flattery puts it, ‘it remains to be seen whether or not Osborne’s Budget will amount to his promised bonfire on red tape’.
An increase in the small business rate of R&D tax credit is also a welcome move: it means that for every £1 businesses invest in R&D, they’ll get £2 (rising to £2.25) from the Government. Apparently, James Dyson has been bending Osborne’s ear on this one, and his entrepreneurial input seems to have rubbed off. Lee Hopley, chief economist at the EEF manufacturer’s organisation certainly thinks so: ‘The uplift will provide a much-need cashflow boost’ to innovative businesses,’, he says.
Speaking of cash boosts, Osborne also announced big changes to the Enterprise Investment Scheme; the amount that any individual can invest through the scheme is to be doubled, while the amount of income tax relief they get will increase from 20% to 30%. He also made more companies eligible for this kind of investment, by expanding the upper limit to 250 staff (from 50) or £15m in assets (from £7m). With bank funding still hard to come by, it makes perfect sense to encourage alternative sources of finance.
Entrepreneurs may also be able to benefit from one of the 21 planned enterprise zones (the original plan was for 10). And they’ve also seen an unexpected increase in entrepreneurs’ relief, the amount of capital gain they can earn over their lifetime that gets taxed at the lower 10% rate – this has gone up from £5m to £10m (despite having only just gone up from £2m). That means they get to keep a greater share of the proceeds when they sell a successful business – and will hopefully have more money to plough back into other projects.
Throw in the fuel duty cut (which will help on the cost side), and you’ve got a fairly enterprise-friendly Budget. Well, someone’s got to create all these private sector jobs, after all…