Firm News

Budget 2011 – enterprise and tax simplification at heart of Chancellor’s measures

Stratford-based firm of chartered accountants Murphy Salisbury is advising clients to pay close attention to Chancellor George Osborne’s 2011 Budget, which includes measures aimed at boosting enterprise and simplifying taxation.

While last year’s Emergency Budget was seen as the biggest package of spending cuts and tax increases in a generation, this year’s Budget was described by its author as “a call to action for Britain” which was neither about raising taxes nor offering “giveaways”.

Instead, the Budget is aimed at encouraging enterprise, export and manufacturing while easing the burden of families who were struggling to cope with the cost of living.

Measures outlined by the Chancellor included cutting corporation tax by 2% – more than the expected 1% – from April 2011. The tax-free personal allowance on income tax will be increased to £8,105 from April 2012, affecting anyone earning less than £115,000 a year.

Mr Osborne also revealed that the Government is to consult on plans to merge income tax and National Insurance, saying that having two separate taxes imposed unnecessary costs on many smaller businesses.

There was further good news for small businesses with the announcement that there would be no new regulation imposed on firms with fewer than 10 employees for three years. The business rate relief holiday for small firms will be extended by another year to October 2012.

Entrepreneurs relief will be doubled from £5 million to £10 million from April 2011, while certain capital allowance rules will be doubled from four years to eight years.

The Government will also continue to invest in jobs and skills, with funding for a further 12 university technical colleges, as well as 40,000 new apprenticeships for unemployed young people and 100,000 work experience placements. An initiative called Start-Up Britain will also be launched to encourage new business start-ups across the country.

Tax simplification also played a key role in Mr Osborne’s Budget speech, with 43 tax reliefs being scrapped following recommendations from the Office for Tax Simplification. He also pledged to crack down on “open abuses” of tax loopholes.

There was good news for charities too as Gift Aid reforms were announced. The Chancellor also announced that a 10% discount on inheritance tax would be given to anyone who left 10% of their estate to charity.

Although there was no reduction in VAT on fuel, Mr Osborne reduced fuel duty by 1p, delaying any increase until 2012 and the annual fuel escalator until 2012. This will be paid for by a £2 billion tax increase for North Sea oil companies.

The Office for Budget Responsibility’s growth forecast for 2011 was downgraded from 2.1% to 1.7%, with the forecast also downgraded to 2.5% for 2012, 2.9% for both 2013 and 2014 and 2.8% for 2015. This was due to a 0.6% contraction in the economy in the last three months of 2010.

Steve Smith, senior partner at Murphy Salisbury, said: “There’s certainly good news for businesses in this year’s Budget, particular with a bigger than expected reduction in corporation tax and the extension of the business rate relief holiday for small firms.

“We have heard some ambitious plans from the Chancellor for helping business growth, but the proof is always in the pudding, so it will be interesting to see what changes have taken place when the next Budget comes around.”

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