Chancellor George Osborne delivered the coalition’s second Budget on 23rd March 2011. Despite Osborne heralding it as 'unashamedly pro-growth, pro-enterprise and pro-aspiration', it was predicted that the Budget 2011 would be uneventful.
However, there were some fairly significant concessions and breaks affecting small business owners, which form part of the Government’s overwhelming aim to make the UK an entrepreneurial and nurturing environment, to attract new business start-ups and make it the most competitive tax system in the G20.
The key announcements were as follows:
The increase in the personal allowance is estimated will take 260,000 more people out of income tax and reduce the tax paid by 25 million people by £48 on average. Furthermore, the basic rate limit has also been decreased by £630, therefore avoiding the creation of additional higher rate tax payers.
The tax avoidance crackdown complements HMRC’s recent announcements of Business Records Checks and the so-called ‘Plumber’s Amnesty’. The government’s message with this Budget is that they want to close down schemes which disguise remuneration, avoid corporation tax, VAT and stamp duty land tax. The Budget outlines specific measures such as reducing the benefit of the VAT loophole surrounding Low Value Consignment Relief, which can currently mean goods such as CDs, DVDs, memory cards etc are VAT-free.
IR35 was a focal point for the OTS, yet it had little mention in Osborne’s speech, but delving through the full Budget report, it becomes apparent why. The government has decided to retain IR35, as abolition would put ‘substantial revenue at risk’.
It was also hoped that the government might change their proposals to amend hot topics such as the Furnished Holiday Let rules, the tax savings for employer-supported childcare, the tax relief restrictions for pensions, but sadly, they remain unchanged.
In summary, it is disappointing that the government did not reverse their decision on some of their proposals and did not tackle some of the contentious areas such as IR35. But ultimately, most will be pleasantly surprised by Budget 2011, particularly entrepreneurs and SMEs, as there is a clear message of support for the innovation of the private sector.
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