Budget reaction, news & views

Phil Smith

Phil Smith

The Chancellor of the Exchequer George Osborne yesterday delivered his last budget before this year’s General Election.

Here is a round-up of the reaction from business leaders across the South West.

 Phil Smith, Managing Director of Business West said: “This was a budget focused on the big fiscal fundamentals, with George Osborne stressing his credentials on debt and deficit reduction in the lead in to the general election.

“We didn’t see big spending giveaways, which is a relief for those who know that tax pledges before elections are usually reversed immediately afterwards.

“Businesses will welcome many of the measures on business tax. Confirmation of the cut in the rate of corporation tax to 20% was aimed at sending a message globally that Britain remains open for business.

“It is the measures on National Insurance contributions and business rate reform that will be more of interest to small and medium firms though.

“Business rates reform was trailed in the Autumn Statement, and plugged again today.

“We await the detail with keen interest, but as reform has to be fiscally neutral, it is hard to see how we are going to see really fundamental reform of this outdated and unfair tax, without ‘robbing Peter to pay Paul’.

“There is better news for the self employed, with the abolishment of class II National Insurance contributions.

“The abolishment of the annual tax return will be  good news for all those small traders and the self employed who have ever struggled with time consuming returns on the 31st of January – but it is unclear just how simple the alternative will be.

“The cancellation of fuel duty rise pencilled in for September will also reduce pressures on many firms’ bottom lines.

“The South West got some honourable mentions, with a £7 billion transport announcement and a 2% cut in cider duty.

“It’s also great news that the government has announced full approval to the North fringe to Hengrove metro bus scheme in greater Bristol, allowing construction to start next month.

“But what was most striking is how little attention is being paid to the West of England compared to the North of England. The Northern Powerhouse, a “comprehensive transport strategy for the North”, Manchester and new deals for West Yorkshire were all heavily underlined – as was the hopes for a stronger Northern economic performance in the future.

“Manchester being able to retain 100% of business rate growth was a real eye catching pledge.

“There is a real danger that our region is going to miss the boat if it fails to get its act together and put forward a clear offer to government on how we can grow our economy in return for delivering strong leadership for jobs, skills, transport and housing growth. Our local leaders must take note that others are stealing a march on us.”

Malcolm Emery

Malcolm Emery

Regarding entrepreneur’s relief Mike Lea, Managing Partner at the Bristol office of Smith & Williamson said: “The government has announced that legislation will be introduced to prevent entrepreneurs’ relief applying to certain disposals of shareholdings, where the holding structure for the shares is considered to have been contrived for the purpose of obtaining the relief.

“The new measures are designed to capture arrangements such as those where an individual may have held a small direct stake in a trading company, but may have arranged a higher effective percentage shareholding through a joint venture structure.

“The new measures will affect any disposals of shareholdings on or after 18 March 2015.

 “New legislation will also be introduced to prevent entrepreneurs’ relief being claimed in the disposal of personal assets used in company or partnership business under the “associated disposal” rules, unless there is also a contemporaneous disposal of at least a 5% share in that company or partnership business.

“There has previously been no minimum requirement to the size of withdrawal from the business.  The new measures will affect disposals of assets on or after 18 March 2015.

Regarding corporation tax, Mike said: “The government has announced new measures to prevent the utilisation of brought forward corporation tax losses where the entitlement for utilisation has only arisen due to an artificial or contrived arrangement.

“The new measure will be effective from 18 March 2015, and will also catch existing arrangements already in place, to the extent that the arrangement generates taxable profits on or after 18 March 2015.

“For companies with an accounting period straddling 18 March 2015, taxable profits will be allocated into notional periods before and after that date, with the new rules applying to the notional period commencing on 18 March 2015, based on a time or otherwise just and reasonable basis.

On the creative industries, Allister Weir, tax partner at Grant Thornton South West, said: “The changes announced in today’s Budget are further evidence of the Government’s support of the South West’s creative industries.

“Earlier this year, the Treasury sought out the views of businesses in TV, Film and Video Games production and it has delivered what was asked of it.

“The changes reduce the minimum expenditure that is needed in the UK to 10% in order for a TV or Animation programme to qualify for a tax credit, modernise the cultural tests, and ensure large budget films access the full 25% rate of tax credit on all UK expenditure.

“In addition, the scope of the new tax credit for children’s TV was confirmed, as was a Video Games prototype fund.

“All these measures will encourage further growth and investment in the South West, further stimulate the post-production and visual effects sector, and ensure the UK remains an attractive location for studio filming in what is becoming an ever-competitive world stage.”

Peter Martin, Associate Director, Agency and Development at CBRE Bristol, comments: 

“Any changes to income tax that puts more money in the pockets of hardworking Brits is good news for the wider economy, and retailers in particular are set to benefit.

“Thanks to growing confidence among shoppers, we expect to see improved spending power across the country, with activity likely to increase further.

“But it’s not just traditional retailers that will benefit. Investment in warehouses, logistics and distribution centres has grown 60% over the last year culminating in £2.9bn of investment in 2014 partly thanks to the growth in online retailing.

“With more money to spend online, demand for this type of commercial space will continue to grow.

“It’s also welcome news for businesses across the UK that the Chancellor is pledging to increase investment available to UK regions through new enterprise zones and improved transport links.

“The benefits to regional economies should stimulate a new wave of economic growth that will capitalise on rising business confidence.

“Our research shows that office space demand from SMEs in Britain’s cities outside of London has reached the highest level since the start of the economic downturn, up 15% year on year.

“This announcement could bring local and regional economic acceleration.”

Malcolm Emery, Partner at Thrings and a dual-qualified chartered tax adviser and solicitor, said: “George Osborne delivered his sixth and final budget of this Parliament, and in true pre-election style, has attempted to woo those savers and first time buyers among us.

“Tax on income from savings will be abolished for millions while a new ISA will be available for first time buyers. The scheme will help many individuals save for a property by contributing £50 to every £200 they save.

“With property prices in the South West being among the highest in the UK outside of London, the scheme will hopefully assist more first time buyers to get on the property ladder.

“While some prefer to go out with a bang, Mr Osborne is obviously planning for his next term of office by delivering a very measured Budget.

“Building on the austerity measures implemented five years ago, he declared that ‘Britain is walking tall again’.

“The Office for Budget Responsibility says the UK is growing and it has revised its growth forecast for 2015 upward from 2.4% to 2.5% while the country’s debt is falling as a share of GDP.

“A pre-election Budget is never a good time to make waves but some mid-market businesses may be disappointed by today’s announcement.

“Despite significant tax revenues being generated in this market, successive governments have failed to invigorate businesses by introducing innovative tax reforms to help boost their profitability and the economy as a whole.

“A large number of these businesses operate in the South West, and many will argue that the lack of tax reforms has impacted on the performance of the local economy.

“The Chancellor is trying to assist smaller companies raise finance to help their businesses grow.

“He has announced changes to the Enterprise Investment Scheme (EIS) and Venture Capital Trusts so that both schemes are compliant with the latest state aid rules.

“The EIS in particular is a very popular way for fast-growing companies, particularly those in the technology sector, to raise working capital from private equity sources.”