SMEs and large enterprises in the technology sector could benefit from the Budget unveiled by chancellor George Osborne yesterday, as he seeks to foster growth in the UK economy.
The government underlined its commitment to keep large enterprises in the UK by announcing that corporation tax will be reduced by two per cent, rather than the one per cent previously announced, from April 2011.
The corporation tax reduction will ensure the UK has the lowest rate of corporation tax in the G7, according to the Treasury.
Today’s move will see a reduction in the corporation tax take of £425 million in the financial year to March 2012, with the new 23 per cent rate cutting the haul by £1 billion in 2014/15.
Osborne had previously intended to bring corporation tax down to 24 per cent by 2014/15.
“Britain is open for business. We want to make Britain the place where international businesses go, not where they leave,” he said.
Several major technology firms, such as Facebook and Google, have their European headquarters in Dublin to take advantage of the lower corporate tax rate of 12.5 per cent, so the government will be hoping to encourage them into Britain.
Superfast broadband zones for businesses
Osborne also revealed that the government will create 21 enterprise zones in major regions across the country offering superfast broadband networks and reduced business rates.
The first locations will be developed in Birmingham, the Black Country, Leeds, Greater Manchester, Tyneside, Bristol, Derbyshire, Nottinghamshire and Sheffield, with the rest to be revealed in the summer.
The last location will be in London in an area to be chosen by mayor Boris Johnson.
Boost for tech start-ups?
At the other end of the scale, Osborne announced that the government will introduce a moratorium on “domestic regulations” for the next three years to encourage startups and firms employing fewer than 10 people.
Small company R&D tax credits will rise by 200 per cent and then to 225 per cent in an effort to help encourage the development of new services that will generate future revenues.
Osborne also said that a new venture called Start-up Britain will encourage new business development, and that the government will look to improve the country’s intellectual property regulations, although no hard details were given. The Small Business Rate Relief holiday will also be continued until October 2012.
Osborne added that this will continue to come down over time to be as low as 23 per cent by 2015, making it the lowest of all G7 nations.
New technology colleges and protection for IP
In addition, 24 new technical colleges will be funded to develop the skills necessary to meet the demands of UK enterprises in an increasingly digital world.
The government also plans to increase the protection of intellectual property in order to bolster the digital and creative sector.
As part of the Budget, chancellor George Osborne listed the creative and digital industry as one of those, along with life sciences, that it planned to protect in order to encourage growth.
One of the key areas that the government has been looking at, with a review currently taking submissions, is to protect intellectual property (IP) to make sure those developing software and services do not find their revenue eroded.
Osborne made a specific comment in his Budget on the issue, “In digital and creative industries we will improve the intellectual property regime,” which will be seen as a clear indication that more is going to done to protect IP.
In its submission FAST underlined the size and economic contribution from the software industry, which turns over more than £50bn and employs 430,000 people.
The FAST submission followed on from one made by the CBI which urged the review to come to the conclusion that there had to be a global framework to protect IP rights.
Reaction from opposition
His second budget was greeted by cheers on the coalition benches but was damned by Labour leader Ed Miliband. He said: “It is the same old Tories. It is hurting but it isn’t working.”
Mr Osborne admitted that the recovery would be more sluggish than expected and the deficit take longer than previously planned to pay off.
The Office for Budget Responsibility slashed its growth forecast for this year from 2.1% to just 1.7%, although Mr Osborne said that it would pick up in future years.
At the same time borrowing over the next five years will be a total of £47 billion higher than previously predicted.
Key points from the Chancellor’s Budget:
• Fuel duty cut by 1p per litre from 6pm today.
• Corporation tax reduction by 2%
• Rates of alcohol duty unchanged.
• Tobacco duty changes from 6pm today.
• £100 million extra to be invested in new science centres.
• Green deal to reduce energy bills from next year.
• The UK to become the first country in the world to introduce a carbon price floor for the power sector.
• New “green investment bank” to have access to £3 billion of funds.
• 24 university technical colleges to be founded.
• Extra 40,000 apprenticeships for jobless young people in England.
• Hutton recommendations on public sector pensions accepted.
• Single-tier £140-a-week flat-rate state pension to be created.
• Gift aid administration to be simplified, especially for small donations.
• Inheritance tax discount for charitable donations.
• Tax avoidance loopholes to be closed, raising £1 billion.
• Personal tax allowance to rise from £7,475 to more than £8,105 in April 2012.
• Air passenger duty rise to be delayed.
• Business mileage allowance increased from 40p to 45p.
• Petrol price escalator cancelled when oil price is high.
• Funding for 21 new Enterprise Zones
