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Small and medium businesses seem to have broadly welcomed George Osborne's 2016 Budget.
The Chancellor announced that corporation tax was to be cut to 17% by 2020, and that starting in 2017, the threshold for small business rates relief would be raised from £6,000 to a maximum of £15,000.
It is estimated that 600,000 small businesses will be relieved of paying business rates altogether. Osborne said that the changes would "put rocket boosters on the backs of enterprise and productive investment".
The Chancellor announced plans to increase the threshold for the standard business rates multiplier to a rateable value of £51,000, taking 250,000 smaller properties out of the higher rate.
He also said that moving forward, the annual indexation of business rates will be based on CPI, the main measure of inflation, rather than RPI, which should lead to more accurate rates bills for businesses.
“Since 2010, the government’s economic plan has delivered security for British business. Reducing the deficit and fixing the public finances is continuing to provide the strong and stable environment which businesses need,” the Treasury said in its Budget document.
“Reforms to the banking sector have made the UK economy more resilient and ensured that banks lend again. By supporting capital investment – committing over £100 billion to infrastructure over this Parliament and setting up the National Infrastructure Commission – the government is continuing to take the long term steps to make the UK the best place in the world to do business.”
Mike Cherry, policy director at the Federation of Small Businesses, said that the announcements were ‘positive indicators that should help many members and small businesses generally’.
"Clearly the announcement on permanent small business rates relief, with a threshold of £15,000 is more than we had asked for," Cherry commented. "We had been asking for £12,000 and he gone higher than that. And then there is a higher rate threshold between £18,000 and £51,000. That is certainly going to help businesses across the UK and is a very welcome step on the road to total reform."
Across the tech sector, the Budget was welcomed – for the most part – with open arms.
“The government has further acknowledged the valuable contribution tech startups make to the UK economy with its pledge to reduce corporation tax for SMEs,” said Erki Kert, CEO of Big Data Scoring. “The UK has cultivated a hub of technology innovation in London that attracts talent from all over Europe. This fast-growth sector creates jobs and is making positive contributions to the economy.”
Ed Relf, CEO of online startup Laundrapp commented: “Promised tax cuts and abolished business rates will go a long way to help entrepreneurs grow the on-demand ecosystem, offer more jobs, drive innovation and help Britain ‘put stability first’ and remain one of the world’s fastest growing economies. Time will tell if these tax cuts go far enough to facilitate our digital age.”
Of course, what one hand giveth the other taketh away. Last year, the Chancellor announced that local councils would retain money from business rates as part of his devolution programme. Councils are now concerned that the revised business rates threshold will remove money from their coffers.
Elsewhere in the Budget, there was news that tax inspectors are to be given new powers in order to crack down on online marketplace fraud. The move is aimed at overseas sellers that use the likes of eBay and Amazon to circumnavigate their VAT obligation. Should sellers not play nice with the tax inspectors, Mr. Osborne said that the marketplace vendor could be held liable to pay the missing tax.
Amazon and eBay have both welcomed the move.