Budget 2013: IT startups could benefit as Osborne focuses on SMEs

Chancellor of the Exchequer, George Osborne, delivered his Budget to the House of Commons today and focused largely on providing benefits to SMEs, including reductions in National Insurance and funding for external advice.

Small to medium sized businesses have been a core focus for the coalition government, particularly in London’s Tech City, where the east end has seen investment to help support a flourishing technology start-up scene.

Osborne’s biggest promise to SMEs in this year’s Budget was what he dubbed a “tax off jobs”, where every company in the UK will take the first two thousand pounds off their National Insurance bill.

“To help create jobs and back small businesses in this country I am today creating the Employment Allowance. It’s a tax off jobs,” said Osborne. “It’s worth up to £2,000 to every business in the country.”

He continued: “And it will mean that 450,000 small businesses – one third of all employers in the country - will pay no jobs tax at all. For the person who’s set up their own business, and is thinking about taking on their first employee – a huge barrier will be removed.”

According to the Chancellor, this means that a company can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax at all. He expects that 98 percent of the benefit of this new Employment Allowance will go to SMEs and will become available in April next year once the legislation is passed.

Osborne also announced a further reduction in corporation tax, where from April 2015 companies will only have to pay 20 percent in taxes – down one percent on the previous year. This 20 percent tax rate compares to 29 percent in Germany, 33 percent in France and 40 percent in the United States.

“Today, I want us to send a message to anyone who wants to invest here, to create jobs here, that Britain is open for business,” Osborne told MPs.

“Britain will have a 20 percent rate of corporation tax – the lowest business tax of any major economy in the world. That’s a tax cut for jobs and growth.”

SMEs are also set to benefit from a substantial increase the value of procurement through the Small Business Research Initiative (SBRI) – which aims to address barriers to innovation for SMEs and help government departments engage with smaller business.

According to the Budget, “Under the SBRI, businesses compete for government contracts to develop new ideas with the potential to tackle public sector challenges. The government will substantially expand SBRI among key departments so that the value of contracts through this route increases from £40 million in 2012-13 to over £100 million in 2013-14 and over £200 million in 2014-15”

In addition, the government will also be providing £30 million for a Growth Vouchers programme in England. This will test a variety of approaches to helping SMEs overcome barriers to achieve growth, such as limited use of external advice.

For example, the programme will target a number of specific areas, such as making a successful loan application to a bank or taking on an employee.

Osborne also went on to reiterate that the government will not tolerate tax evasion and avoidance – something a number of high profile tech companies have been accused of by MPs.

“Britain is moving to low and competitive taxes. But we should insist people and business pay those taxes, not aggressively avoid them or evade them. That’s the right way to succeed in the global race,” he said.

“Today, I am unveiling one of the largest ever packages of tax avoidance and evasion measures presented at a Budget. They include agreements with the Isle of Man, Guernsey, and Jersey to bring in over a billion pounds of unpaid taxes. New rules to stop the abuse of partnership rules, corporate tax losses and offshore employment intermediaries.”

He added: “That’s another two billion pounds. And we will name and shame the promoters of tax avoidance scheme. My message to those who make a living advising other people how aggressively to avoid their taxes is this: This Government is not going to let you get away with it.”

Finally, the Chancellor explained how the government plans to support the economy with the infrastructure it needs. He referenced broadband and mobile telephony investments that have already taken place and pointed to an additional £3 billion a year from 2015-16 to support long term infrastructure plans.

Although details of these plans will not be unveiled until June, they may well include technological or telecoms based projects.

“We’ve switched billions of pounds from current to capital spending since the spending review. But on existing plans, capital spending is still due to fall back in 2015-16. I don’t think that’s sensible,” said Osborne.

“So by using our extra savings from government departments, we will boost our infrastructure plans by £3 billion a year from 2015-16. That’s £15 billion of extra capital spending over the next decade.”

He added: “Because by investing in the economic arteries of this country, we will get growth flowing to every part of it. And public investment will now be higher on average as a percentage of our national income under our plans than it was in the whole period of the last Government.”

Copyright © 2013 IDG Communications, Inc.

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