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Last Updated:  Wednesday, 9 April, 2003, 12:39 GMT 13:39 UK
Business wooed with red tape cuts
Engineering worker at Renishaw
Bigger tax breaks for research and development
The chancellor is trying to woo small business by cutting red tape, increasing tax relief and freezing a series of taxes.

The general reaction from business was to give the Budget a cautious welcome, largely because it could have been worse.

The taxes being frozen include corporation tax, small business corporation tax and capital gains tax.

The fact that none of these was increased came as a relief to companies already smarting from the one percentage point rise in national insurance tax which took effect this month.

The Budget also left stamp duty on buying business properties unchanged.

But measures to cut down on avoidance will lead to a new rate of stamp duty on rental leases later this year - a move that was heavily criticised by the employers' organisation the CBI.

Haulage companies will benefit from a freeze on vehicle excise rates for lorries.

Gordon Brown also decided to defer the rise in duty on fuel for six months because of the high and volatile oil price caused by the war in Iraq.

Landfill tax rises

There were a series of measures on VAT specifically aimed at small companies.

Firms with a turnover of less than 56,000 will no longer have to pay VAT and more small businesses will be exempt from automatic fines for late payment of the tax.

[The chancellor] seemed to be moving to meet small business's concerns - for the larger business, there was nothing
Rosalind Upton, Ernst & Young

As well as that, more companies will be able to cut their paperwork by taking advantage of paying a flat rate of VAT.

And the chancellor announced a review that would lead to a higher number of small firms being released from "burdensome audit requirements".

He said there were also plans to abolish or reform 40 different regulations - a response to the heavy lobbying from business about the increase in red tape since Labour came to power.

As for big business, oil companies will benefit from the abolition, next year, of the controversial North Sea oil taxes on new production.

But one tax that is being increased is landfill tax - it is a rise that was signalled in the pre-Budget report last November.

Landfill tax was increasing automatically by 1 per tonne per year, but from 2005 it will increase by 3 a tonne each year up to a long-term rate of 35. It is currently 14 per tonne.

Injecting money

Mr Brown returned to one of his favourite themes - innovation - and said that existing tax breaks for research and development would be extended.

He said he was raising the qualifying threshold for small and medium-sized businesses so that more of them would become eligible for 40% investment allowances.

The existing 100% allowances for investment in IT would be extended for a further year to April 2004.

And sectors including catering, retail and vehicle repairs would be eligible to borrow from the Small Firms Loan Guarantee scheme.

The chancellor also announced proposals for the creation of British Small Business Investment Companies - private sector vehicles to inject new capital into small and medium-sized firms.

Rosalind Upton, a tax partner at Ernst & Young, said: "We had the usual rhetoric about help to businesses and at least this time [the chancellor] seemed to be moving to meet small business's concerns.

"For the larger business, there was nothing."


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