Yesterday’s budget announcements will provide solace for small business owners who have seen their resources stretched increasingly thin.
While it has been widely expected that the government would increase corporation tax as an aid for economic recovery, the exemption of corporations who earn less than 50,000 in profit came as a significant relief to the majority (70%) of businesses. There is, however, some credible concern being raised that the creation of the tax bracket will stunt investment and innovation as companies attempt to avoid falling into the corporation tax trap. Nevertheless, the announcement should succeed in protecting small and growing businesses by reducing further cuts to their profits that they can use for reinvestment.
There was a clear theme throughout the budget of trying to encourage investment; such as the decision to allow businesses to claim back 130% of their new machinery costs back as a tax cut. Reducing the cost of investment in areas such as the purchasing of assets will allow employers to focus their excess funds elsewhere, which consequently could see a positive impact on employment opportunities.
Additionally, the government's extension of both the furlough scheme and the business rates holiday has provided lifelines to businesses who are still yet to return to full capacity, specifically within the retail, hospitality and leisure sectors. Although businesses should ensure they are allowing time for their employees to reintegrate to the work environment, as employers may face real difficulties in reintegrating and reskilling their workforce.
The budget has also brought about the introduction of free ports, where businesses in places such as the Humber will benefit from tax breaks and cheaper custom chargers, in a move aimed at increasing investment and opportunity in deprived areas. This could also have a more general benefit to the whole of Yorkshire, as businesses will be attracted to the area resulting in the creation of jobs. However there are concerns that free ports will be of detriment to the taxpayer if small businesses are edged out of the areas, and large corporations are able to exploit them for tax avoidance purposes. It will be down to the government and local authorities to ensure these ports are being used for investing in local business owners and not large corporations.
We have a wide range of lawyers and resources at Langleys available to advise people and businesses across Yorkshire, Humber and Lincolnshire. Please do get in touch with us.