'Vague' Budget fails to impress business leaders

Businesses and their advisors have expressed their disappointment at Gordon’s Brown ninth Budget, saying it makes them feel less confident about the state of the British economy.

According to a wide-ranging survey of tax directors, chief executives and business owners, an overwhelming 73 per cent fear the tax burden will increase significantly in the next three years.

A further 43 per cent expect their company’s tax rates to increase, while just 65 per cent said they believe the economy is strong and healthy - 10 per cent less than last year.

The survey from top accountants Price WaterhouseCoopers, also showed that one fifth of businesses predict there will be “trouble” in the future.

John Whiting, a partner at PWC said: “It seems the business community are becoming less confident of the Chancellor’s stewardship of the UK economy.”

However, business chiefs did stamp their approval on Brown’s efforts to encourage entrepreneurship and foster the “enterprise culture” he proudly claims to champion.

According to the survey, 69 per cent identify progress in Brown’s new deal to boost entrepreneurial behaviour but respondents said he still has some way to go.

This is apparent by the small number (5 per cent) of enterprise chiefs who believe the R&D tax credit has made a significant difference, despite the Chancellor’s extension of the incentive to mid-sized research companies.

“The Chancellor has made some welcome moves to encourage entrepreneurial behaviour,” said John Whiting.

“However, it seems that these haven’t so far translated into real benefits for business. The Chancellor should perhaps look at broadening and simplifying tax incentives so that they make more of an impact.”

On the issue of tax reform, business leaders are clearly thinking of tax implications outside of enterprise, as the most unpopular burden in need of reform emerged as inheritance tax.

Forty three per cent of respondents said IHT needs amendments, while the rest called to reform corporation tax (9 per cent), income tax (19 per cent) and council tax (11 per cent).

Beyond the PWC survey, the reaction to the Budget from business advisors has been cautious.

Simon Dolan, of SJD Accountancy, told Freelance UK: “It has proved to be a fairly neutral Budget for enterprise. There was no change in tax, no change in personal allowances and a promise to cut red tape which is good news, but has been in every Budget since 1701.

“The one positive move is that the proposals for a single tax payment system shows the government is aware at how complicated the system is for small limited companies to pay tax, in light of IR35, S660 & IR591. Hopefully they will wipe these tax rules away and replace them with an equal payment system for all self–employed people, regardless of the legal structure taken by the entrepreneur.”

UK Tax Relief said they thought the Budget for enterprise from the Chancellor was best described as “real damp squib – because he had the chance to make what could be his last Budget a real winner for enterprise.”

Angela Brooks-Wong, Director of the group, told Freelance UK: “The only remarkable thing is lifting the stamp duty threshold up to £120,000. And so instead of focusing on business initiatives, higher tax revenues to make people more profitable or lifting red tape directly - Brown has delivered a vague Budget without delivering any of these positive things.”

The Federation of Small Businesses has echoed disappointment that the Chancellor failed to tackle the mountain of red tape stifling small businesses, despite acknowledging the work of Philip Hampton & David Arculus.

Carol Undy, chairwoman of the FSB, said: “The Better Regulation Taskforce is certainly radical, but whether there will be a ‘fundamental change’ and red tape revolution’ remains to be seen. Businesses are cynical because of broken promises.”

Meanwhile, the post-Budget pessimism among advisors has already spread to clients across the small business sector.

A small firms study by the Forum of Private Business found that 54 per cent of members described the Budget as ‘OK’ while more than an third (33.9 per cent), said it would be bad for business.

Nick Goulding, chief executive at the Forum, said: “Our members recognise that some progress has been made with the promises to reduce the regulatory burdens faced by smaller business, but as the lukewarm response to our survey shows, the Chancellor has missed the opportunity to do far more to boost the smaller business sector.”

 

22nd March 2005

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