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Tuesday, 22 June 2010

Chamber Reaction to Budget

Dr Brian Sloan, Head of Business and Economic Policy at Greater Manchester Chamber.
Given the scale of the task ahead of the Government to reduce the deficit and debt, businesses will view this as a positive Budget for the private sector.

The Chancellor committed to maintaining capital spending, which for Greater Manchester means final confirmation of funding for the Metrolink expansion programme and the Chancellor announced improvements to the Liverpool to Leeds rail line that we hope will include electrification.

On Corporation Tax the Chancellor announced that over the coming four years the headline rate will fall to 24% and the Small Companies’ Rate to 20%, paid for in part by a reduction in the Annual Investment Allowance and changes to other allowances. The preferential treatment of business assets for the purposes of Capital Gains Tax has been maintained and Entrepreneur’s Relief extended to £5 million, potentially saving another £240,000 tax on the sale of a business or businesses over a person’s lifetime.

The widely anticipated rise in VAT has been delayed until 4th January 2011, by which time it will be hoped that inflation has fallen back and the inflationary impact of this tax will not give the Bank of England cause to increase interest rates prematurely. Businesses will however incur the administrative burden of changing VAT rates that were estimated by HMRC to be £125 million for the change back to 17.5%.

Although the previous Government’s planned 1% increase in Employers’ National Insurance will go ahead, the threshold will be increased so that for employees earning less than £20,800 there will be effectively no increase.

There is also good news for businesses setting up outside London, the South East and East, in areas dependent on the public sector. New businesses in these areas will be exempt from up to £5,000 Employers’ National Insurance Contributions on the first 10 jobs that are created. We are also pleased to see that the 50p landline tax has been abolished before it was introduced. Vince Cable will also be launching a review on how to expand the availability of credit to businesses.

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