News & Views
The Budget, announced by the Chancellor of the Exchequer
Sep 22 2010
Mixed Budget for UK Bioscience
The BioIndustry Association (BIA) believes that the Budget, announced by the Chancellor of the Exchequer, falls short of helping to develop an economy based on innovative business such as those in the UK’s bioscience sector.
The increase in Capital Gains Tax for higher rate tax payers will dis-incentivise investment in the small- and medium-sized enterprises that will drive the future growth of the UK economy as outlined by the Coalition Government. The decision to increase Entrepreneurs’ Relief from £2 million to £5 million will be of little value for investors in bioscience companies as it is more often than not the case that they do not hold the minimum 5% of the company and therefore will not benefit from this relief.
However, the BIA is encouraged to see that the Chancellor will consult with business to review the taxation of intellectual property, the support R&D tax credits provide for innovation and the proposals of the Dyson Review. The BIA is keen to work with the new administration to ensure that bioscience companies will only benefit from any reforms.
Nigel Gaymond, Chief Executive of the BIA, said: “The decision to increase Capital Gains Tax could be harmful to the UK bioscience sector in terms of attracting interest from investors in small, early stage companies. As always, the devil is in the detail and I very much look forward to hearing from the Chancellor in response to our representations to him in May and June. On the surface of it, this is a missed opportunity from a Coalition Government that spoke strongly about an innovation driven economy prior to the election. However, the BIA is committed to working with the Government to ensure that they understand the specific needs of the bioscience community.”
The Chancellor’s decision in the Budget to retain the proposed ‘patent box’ to help encourage the creation and exploitation of innovation in the UK has been welcomed by the Association of the British Pharmaceutical Industry (ABPI).
The ‘patent box’ as proposed by the Office for Life Sciences would apply a 10% rate of corporation tax to UK based patent income from April 2013, and would thus strengthen incentives for companies to invest in innovative activity in the UK. “We are delighted that the Chancellor has decided to retain this important initiative as we believe it will make a significant contribution to the UK’s ability to retain its world-leading position in an increasingly competitive global environment,” said Dr Richard Barker, Director General of the ABPI.
The reduction in corporation tax has also been welcomed by the ABPI, given that other countries have been able to offer lower rates than the UK to attract, in particular, pharmaceutical manufacturing to their shores.
The Chancellor’s decision to stimulate smaller businesses by cutting the small profits rate to 20 per cent was also welcomed by the ABPI.
Almost half of Britain’s small businesses were pleasantly surprised by George Osborne’s ‘emergency budget’ a new survey has found. However, research carried out by the Forum of Private Business discovered that some small business owners fear tax rises and other measures included in the Budget could lead to a double-dip recession.
In all, 47% of smaller firms believe that policies announced by the Chancellor are better than expected. However, 11% of small business owners surveyed feel they are worse and Osborne’s policies could plunge the economy back into recession.
"Many entrepreneurs feel this Budget has given their businesses a timely boost – particularly in reducing red tape and tax cuts and the proposals for an overhaul of business taxation," said the Forum’s Research Manager, Tom Parry. "But concerns remain over bank lending, the impact on job creation of the National Insurance rise, public-sector cuts and areas of government support. The result of the coalition Government’s first test appears to be that it has passed but is not yet achieving top marks."
The Forum’s survey also found that the decision to partially reverse the planned increase in employers’ National Insurance contributions (NICs) in 2011 is one of the most popular measures among small businesses.
However, some business owners are concerned that, together with the impact of the 2.5% VAT increase and reductions in capital allowances, the tax policy could still prove to be a barrier to taking on staff. Small businesses have welcomed the reduction of the lower rate of corporation tax from 21% to 20% in April 2011 and the Chancellor’s pledge to carry out a root-and-branch departmental review of red tape
affecting smaller businesses.
Further, they applaud the Government’s decision not to increase fuel duty at the present time, restrictions in government spending, the promise of a new capital growth fund, the introduction of a bank levy based on lenders’ balance sheets and the extension of the Enterprise Finance Guarantee scheme, which has been increased by £200 million and the application process reduced to 20 days.
Following the rise in the entrepreneurs’ relief threshold to £5 million, more businesses feel that increasing high earners’ Capital Gains Tax to 28% is beneficial than believe it is damaging.
In addition to the VAT increase, the least popular measure identified by small businesses is the decision to reduce allowance, including the main and special rate of capital allowances to 18% and 8% respectively
and in the Annual Investment Allowance from £100,000 to £25,000. Both are scheduled to take place in April 2012.
Entrepreneurs who took part in the survey scored the success of the Chancellor’s own stated objectives, based on the criteria ‘successful’, ‘unsuccessful’ and ‘neutral’:
Reducing the deficit (84%)
Supporting enterprise (39%)
Fairness (37%)
Creating a stable and certain business climate (29%)
Some small business owners are urging the Government to prioritise other areas of concern, including continued restrictions in affordable bank finance – the most frequently mentioned single issue.
They have also called for an even greater focus on cutting and simplifying red tape aligned to the Forum’s suggestion of a Comprehensive Regulatory Review, greater penalties for late payers, rogue traders and ‘phoenix’ administrations, specific schemes to tackle unemployment – particularly those helping jobless people to learn trades and crafts and allowing public sector workers to start businesses – and exploring alternatives to business rates in order to minimise the impact of VAT on high street businesses.
Further, small businesses want industry-specific measures to improve the car industry, housing market, retail and construction sectors.
According to the survey, retailers and hairdressers are least satisfied with the VAT increase and professional and business service providers with the National Insurance rise.
Manufacturers are concerned at the reduction in capital allowances and annual allowances and some small businesses in the construction sector about the impact of public sector cuts on schemes such as Building
Schools for the Future (BSF).
Digital Edition
Lab Asia 31.4 August 2024
August 2024
Chromatography Articles - HPLC gradient validation using non-invasive flowmeters Mass Spectrometry & Spectroscopy Articles - MS detection of Alzheimer’s blood-based biomarkers Labo...
View all digital editions
Events
Sep 04 2024 Chiba, Tokyo, Japan
Sep 04 2024 University of Warwick, Coventry, UK
Sep 11 2024 Bangkok, Thailand
Sep 11 2024 Singapore
Sep 11 2024 Bangkok, Thailand