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How the 2005 Budget affects business

How the Budget affects business

Red tape and regulation on business will be cut, the Chancellor has promised business.

In his 2005 Budget address, Mr Brown said global trade pressures meant that the UK needed to "remove unnecessary barriers to profitable enterprises". But he said he was resisting pressure to remove the minimum wage.

The government plans to cut the number of agencies overseeing firms, as well as simplify the tax payment system. He said that "instead of a one size fits all approach which can mean that unnecessary inspections are carried out while necessary ones are not carried out, the best practice risk-based regulation now means more inspection only where there is more risk and a light and limited touch where there is less risk."

The number of agencies carrying out inspections will be cut from 35 agencies to 9 - a reduction of 26. Five existing agencies will be merged into the Health and Safety Executive. The Insolvency Service Agency will take over the responsibilities of the DTI’s Companies Investigation Branch. There will now be five inspection bodies for food safety, the countryside, agriculture, animal health and environmental protection.

For companies meeting high standards the Government estimates a major reduction in the number of inspections – a million fewer inspections every year, a reduction in inspections of one third. But for companies persistently breaking the rules there will be tougher penalties.

The Government will also publish new guidelines for dealing with European Union regulation.

To reduce the burdens on business by also cutting back on the flow of regulation the Government is accepting the recommendations of the Arculus Report setting requirements for every department for year by year reductions in the burden on business.

The Inland Revenue and Customs will also now consult on a single tax account for small business where information need be provided only once, a single point of contact for both VAT and corporation tax, and flexible payment options.

70,000 firms no longer have to provide forms that account for every VAT transaction but make just one calculation and pay one flat rate. Working with the Chambers of Commerce the Government said it will encourage take up among the 600,000 companies now eligible to benefit from this VAT simplification.

The Chancellor said his aim must be that Britain becomes the world’s leading location for research-based, science-based and knowledge-based industries. He set out his aims as follows:

Building on the £40 million Research Council investment and £20 million committed by the Wellcome Trust, and supported by the new UK Stem Cell Foundation, Britain will – with a ten year development plan – create a new national network for stem cell research.
we are setting the goal that Britain become the world’s premier location for tracking diseases and developing drugs to treat them.
Because British businesses can also be world leaders in environmentally-friendly technologies, such as in carbon capture and storage, we propose to bring public and private sectors together in a new national energy research network.
Bristol, Nottingham and Birmingham have joined Newcastle Manchester and York as ‘Science Cities’

He outlined the way he intended to help business to fulfil his aims:

after consultation, the government will enhance the R and D tax credit for the mid sized research company;
stimulate small technology intensive companies with a guaranteed £100 million share of public sector research contracts;
offer funding incentives for universities opening their research facilities to business;
and with regional development agencies today announcing more support for growing businesses, offer help for manufacturers on design including establishing a new Design Centre in Newcastle;
and in 2000 enterprise areas the time limited incentive for commercial property purchases which will now end will be followed by a new incentive: over 3 years I will make available a total of £300 million to drive forward local business led regeneration.

The chancellor said he was enhancing small business support so that it serves all communities in the country.
Ways that he would be doing this include:

Supporting the creative industries - which now represent 8 per cent of our national income
To promote young British entrepreneurial talent in business, the Government will expand its new entrepreneur scholarships and he has set aside funds to ensure that by 2006 we meet our target that every school pupil has enterprise education.
To ensure help direct for British film makers, the government will replace existing reliefs with new tax reliefs for both low budget and larger budget films.

Mr Brown said that in order to fill the 650,000 vacant jobs needing people with skills to take them, he would extend the New Deal scheme to become a New Deal for jobs and skills.

To do this there are to be new rules to encourage incapacity benefit claimants into work and reforms in housing benefit to help job creation. The scheme to give lone parents a £2,000 return to work bonus will be extended to new areas. There will also be new centres for vocational qualifications and for entrepreneurship in areas of high ethnic minority unemployment. Plus a new Union Learning Academy, and £65 million has been allocated for the coming year to employers for our successful employer training pilots.

Finally, most of the taxes imposed on businesses have remained unchanged from last year. Corporation tax, the Climate Change levy, the Insurance Premium tax and the Company Car levy have all been frozen.

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