Analysts urge Budget caution among small firms
Posted 21 March 2007 at 4:26PM by Simon Dickson in Investment and finance
With a couple of hours to digest the Chancellor's lunchtime budget speech, we're starting to see some more considered analysis from the experts. And after the euphoria of a headline-grabbing cut in main corporation tax rates, we're seeing growing concern as regards the effect on small businesses.
Miles Templeman, Director General of the Institute of Directors, reckons 'business will end the day happier than it started.' The IoD welcomed the reduction in corporation tax to 28%, thanking Mr Brown for listening to their appeals. But he sounds a note of caution where smaller businesses are concerned:
The package for small businesses, increasing the small companies rate from 19% to 22%, but introducing the £50,000 allowance, will be a winner for very small companies with substantial capital investment. But the one-man company with little capital investment, and many slightly larger companies with profits of a few hundred thousand pounds, will lose out.
Ernst and Young tax partner Patrick Stevens is also wary of the impact on smaller firms:
Ultimately, small companies should not be too hasty in celebrating the Chancellor's Budget - if they want to take any advantage of his generosity they will have to invest £50,000 under the new Annual Investment Allowance. If they don't they'll probably end up paying more tax, as the Small Companies rate rises to 22%.
And KPMG's Tom McGinness says it will leave small businesses confused:
On one hand it rewards them with increased incentives on capital allowances and research and development. On the other it penalises them by increasing the rate at which they pay corporation tax. Despite promises to reduce complexity and administration costs, the proposed changes to income tax and National Insurance will increase the burden on SMEs and act as a disincentive to growing their workforce. The only certainty for SMEs is that the Chancellor's changes will make them less competitive and give them too little too late.
Tags: budget, corporation tax, ernst and young, gordon brown, iod, kpmg
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