"Our aim must be that Britain becomes the world's leading
location for research-based, science-based and knowledge-based
industries," said Chancellor Gordon Brown in his ninth Budget
speech yesterday, which confirmed an increased Government
commitment to research and development.
The Government will be announcing a consultation on the proposed
R&D Tax
Credit during the summer, according to the Chancellor. The
Government will also try to encourage the growth of small
tech-intensive firms with a guaranteed £100 million share of public
sector research contracts.
The Chancellor also said that the Government would offer funding
incentives for universities that opened their research facilities
to business.
"Today's Budget is halfway to getting it right for the knowledge
economy," said John Higgins, Director General of Intellect,
yesterday. "However, in my view this Budget has failed to provide
UK
firms with the incentives they need to invest in
training and still fails to offer sufficient incentive to firms
considering the
UK
as an
R&D
base.
Through its failure to improve the Home Computing Initiative it has
also failed to adequately help the section of the population which
is at most risk from digital exclusion."
"Our message to Government now is: you'll have to do more than
that if you want to make any impact on the UK's competitiveness –
to fail at this is not an option," he added.
Other Budget highlights:
Barriers to Enterprise
Stressing the need to lessen the regulatory burden on businesses
while still ensuring high standards, the Chancellor confirmed a
risk-based regulatory policy that would encourage business
inspections where there is more risk, but take a lighter approach
where there is less risk.
To this end, said the Chancellor, the Government will reduce the
existing 35 inspection bodies in the consumer and trading
standards, food safety, countryside, agriculture, animal health and
environmental protection, health and safety and insolvency sectors
to just nine.
SME single tax
account
The Chancellor was also keen to simplify the VAT system for small businesses, and
announced a future consultation "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".
"Seventy thousand 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 we will encourage take up among the 600,000 companies now
eligible to benefit from this
VAT
simplification," he
added.
Corporation tax
The main rate remains frozen at 30% for 2005/2006 and 2006/2007.
The small companies' rate also remains static at 19%, with
thresholds remaining at £300,000 and £1,500,000.
VAT
thresholds
As from 1st April, the thresholds for
VAT
registration and deregistration will be increased. The annual
taxable turnover limit will be £60,000 for registration, and
£58,000 for deregistration.
VAT
"rounding up"
Large businesses will no longer be able to use the benefit of
"rounding up" – a benefit that allows businesses with a small
amount of exempt activity to avoid any disallowance of overhead
VAT
as a result.
Patrick Walker, head of Indirect Taxes at
PricewaterhouseCoopers, commented: "The removal of 'Rounding up'
for large businesses will lead to an additional
VAT
cost for many – perhaps as much as 1% of overhead input VAT could
be disallowed."
