This week marked the announcement of the coalition government’s 2012 Budget, a budget which Chancellor George Osborne declared would allow the country to work its way out of a recession which it had borrowed its way into.
From what could be heard over the cheers and jeers of over excited MPs, the Chancellor courted with controversy and announced some quite drastic changes to the taxation system. For large businesses the most drastic of these is the cut in corporation tax from 24% to 22% by 2014, 1% lower than previously set out. In an attempt to attract big international business to the country, the government has committed to offering one of the lowest rates of corporation tax in the developed world.
However this cut in corporation tax will do nothing for those small and medium sized businesses earning up to £300,000. For these companies there will be no cut in corporation tax. Further, these businesses face a 5.6% rise in business rates from April 2012 since there was no mention of a change to these plans.
In what will be a bitter blow for independent cafés and bakeries, Chancellor Osborne introduced VAT on all hot food sold. Operating in what is already a price sensitive and highly competitive market, these traders are unlikely to view this as a budget for their business.
These are not the only businesses to suffer however; excise duty has increased by a further 5% putting pressure on independent pubs, bars and restaurants, not to mention breweries and distilleries. Road hauliers are also up in arms as the announcement of a change to the planned hike in fuel duty which many had hoped for never materialised. Tax on a litre of petrol will increase by 3.02p in August, meaning the average price of a litre of petrol is likely to rise above £1.40.
Nevertheless there was good news for some. Small businesses with a turnover of up to £77,000 will be pleased to hear they will be subject to a simplified tax system, enabling them to file tax returns on a cash basis, reducing bureaucracy and cost. Further, the government intend to press ahead with plans to integrate Income Tax and National Insurance allowing businesses to run a single payroll system.
Several UK industries which have been thrown a life-line by the budget are the video games, animation and high-end television production sectors which will benefit from tax relief measures. Responsible for producing some of the world’s leading games franchises such as Grand Theft Auto, the government is keen to slow the loss of investment in this sector to other countries such as Canada. Other industries have however criticised the government’s failure to offer support across the board for businesses looking to export products and services to other countries.
In a bid to capitalise on this year’s London 2012 Olympics, the Chancellor declared Sunday trading laws will be temporarily relaxed for all businesses over eight Sundays in the summer, starting July 22nd. In the run-up to today’s budget commentators have argued this may lead to a permanent relaxation of Sunday trading hours in the not so distant future.
In an attempt to show the government expects the country’s wealthiest to pull their weight during these hard times, a new 7% rate of Stamp Duty Land Tax will has been introduced for homes valued in excess of £2m. Further, to prevent this new rate being avoided, Mr Osborne announced companies buying homes in this bracket will be subject to a tax of 15% of the value of the property.
If the announcements made in the budget have implications for your business plans and you require legal advice in relation to contract, commercial property or a potential commercial dispute, contact Holmes & Hills Solicitors' team of commercialin Essex & Suffolk
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