2008 Budget: the verdict
Article Date: Mar 14 2008Leaders of growing businesses have given a cautious welcome to some of the measures announced in Alistair Darling’s first Budget. However, many feel that the Budget as a whole, including the changes announced last October, will do little for entrepreneurship in the UK.
Neil Pamplin is tax adviser to investment readiness programme Gateway2investment, which helps early-stage ventures secure financing. He tells GrowthBusiness that so-called “entrepreneurs’ relief”, which exempts the first £1 million of lifetime gains from CGT, will not undo the damage done by the rise in the basic rate from ten to 18 per cent.
‘This relief adds up to £80,000 over a lifetime. To call it entrepreneurs’ relief is almost rubbing salt in the wound,’ he says. ‘Being an entrepreneur means you are likely to start businesses again and again and again.’
Pamplin also points out that tax credits for research and development (R&D) will now be subject to a cap of €7.5 million (£5.8 million) per project, though what a “project” is has yet to be defined.
‘It costs an awful lot more than €7.5 million to get a drug to market, for example,’ he says. ‘For those companies hit by this, it will hit hard.’
The Chancellor’s initiatives to encourage people to start businesses, including the launch of a £12.5 million capital fund for women entrepreneurs, were welcomed by Joelle Warren, MD of headhunting firm Warren Partners. She says: ‘As an economy, we have to get more people into entrepreneurship. We have far less than they do on the other side of the pond, and the proportion of women entrepreneurs is smaller too.’
Warren adds: ‘The big question is whether it is enough.’
Gayna Hart, MD of software developer Quicksilva, shares this concern, commenting: ‘£12.5 million isn’t a lot. I’ll be interested to see how he wants to spend it.’
Hart, who worked in government procurement before setting up Quicksilva, finds Darling’s aim of awarding 30 per cent of government business to small and medium-sized enterprises (SMEs) laudable. But she questions whether it has been properly thought through.
‘If I was on a local council I would be thinking, what are the easiest areas to get SMEs into? It’ll end up with cleaning contracts and park maintenance going to SMEs while the complex stuff is left with the big boys as usual.’
Paul Webb, tax partner at the Robert James Partnership, says that red tape is still a barrier to those trying to sell services to the public sector.
Says Webb: ‘The tender procedure is very complex and convoluted. There is a long way to go to simplifying it before smaller businesses have a fair chance.’
For Joelle Warren, the Budget as a whole was uninspiring. She says: ‘It seems to me what he’s doing is encouraging people to go into entrepreneurship with relatively small amounts of money, then hitting them when they try to realise their gains.’
Gayna Hart agrees that Darling has done little to promote enterprise in the UK. ‘If we are expecting a slowdown, we really don’t want to be killing off acquisitions [through the CGT hike] and new starts when we need them most.’
Click here for a summary of key points from the Budget.
