THE Emergency Budget was one of the most severe for decades, with some hefty tax rises – notably VAT – and cuts to public spending. Yet in spite of this, the chancellor made provisions to encourage growth and laid out initiatives to foster entrepreneurial activity.
The extension of the enterprise finance guarantee (EFG) scheme will be welcomed. It plays a key role in providing lending to small firms that would not normally be able to access traditional forms of finance. The EFG scheme will rise by £200m to support extra lending of up to £700m until 31 March 2011 – it should help 2,000 firms.
Other initiatives included the Growth Capital Fund, which will support small businesses with high growth potential. The fund will form part of the current £237m programme of Enterprise Capital Funds and may provide a further £37.5m in equity finance.
Changes to capital gains tax (CGT) for entrepreneurs exiting smaller businesses is also likely to be applauded. Entrepreneurs’ relief, which allows qualifying capital gains to be taxed at a lower rate of 10 per cent, had been applicable to the first £2m of lifetime qualifying gains. The threshold has been extended to the first £5m. But the CGT rate hike to 28 per cent will mean that any further gains will be taxed at a higher rate. Other tax moves like the small profits rate reduction to 20 per cent will be welcomed by SMEs, given the previous government’s plans to raise it to 22 per cent. New businesses established outside of London, the South-East and East of England will now be exempt from up to £5,000 of employers’ National Insurance contributions for each of the first 10 employees hired in the first year of business. This will be cheered by many new start-ups in the eligible areas.
George Osborne declared a tough, but fair Budget was here, so it was encouraging that enterprise initiatives were included. These proposals will hopefully help SMEs continue contributing to economic growth, supporting job creation and generating innovation.