More consultations and wish list in UK budget FY08

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The UK budget 2008 includes many short-term measures to enable small and growing businesses to access the resources they need during a time of global financial market disruption. At the same time it also announced longer-term measures designed around the levers that the government can control to encourage productivity growth.

These measures include:

• Access to finance measures, including enhancing the small firms loan guarantee (SFLG) scheme and enterprise capital funds to support small firms in accessing the resources they need to start up and grow;
• A package of reforms on regulation and tax simplification and implementation of the business tax reforms announced in the 2007 budget, including the lowest rate of corporation tax in the G7;
• Putting in action and further implementation of the Leitch and Sainsbury reviews to build on improvements in the UK skills base and to provide a world-class science base and innovation framework;
• Long awaited progress on business support simplification and measures to ensure better access to government procurement for small firms (see related article - UK Talent); and a study of public service markets and a new framework for infrastructure procurement.

SFLG extension, ECF for women, EIS review
Budget 2008 introduces a package of measures to support small businesses to access the finance and resources they need to start up and grow, responding to business needs in the short term:

• A temporary increase of 20 percent in the amount of finance available through the SFLG scheme, and relaxation of the restrictions on firm age to allow access to the scheme for a wider range of small firms;
• The government will work with the banks to explore mechanisms to ensure small firms are able to access the most appropriate forms of finance, including mezzanine products. It will also provide additional enterprise capital funds of £30 million to support this type of provision;
• A new capital fund primarily focused on businesses run by women;
• An increase in the enterprise investment scheme's investor limit from £400,000 to £500,000 in any one tax year (subject to EU state aid approval), and a consultation on how best to simplify operation of the scheme;
• An increase in the value of share options an individual can hold under the enterprise management incentive scheme from £100,000 to £120,000.

SME procurement target and invoice factoring
The UK government also announced the creation of an advisory committee to provide advice for the 2008 pre-budget report on necessary action to reduce the barriers to SMEs competing for public sector contracts, and on the practicality of setting a goal for SMEs to win 30 percent of all public sector business in the next five years.

As a part of the enterprise strategy the government also announced that firms supplying public services to government will be able to sell public sector invoices to debt specialists.

New university enterprise networks and a national academy
Building on existing provision, a strategy is set out for developing seamless enterprise education, from primary schools to higher education, underpinned by £210 million announced at the 2007 comprehensive spending review. This will include:

• Establishment of a national enterprise academy to equip 16-19 year olds with enterprise skills;
• Creation of university enterprise networks to further develop relevant skills during higher education.

Enterprise strategy
Building on the announcements above, the enterprise strategy sets out how government will further encourage business start up and growth. Focused on small and medium sized businesses, the strategy sets out a new framework for government action, structured around the enablers of enterprise culture, knowledge and skills, access to finance, regulatory framework, and business innovation.

Tax simplification
Building on the significant reforms to the business tax system announced in the 2007 budget, due to take effect from April 2008, and responding to representations from business, the budget further simplifies corporation tax by:

• reforming capital allowances to allow 500,000 businesses to write off pools of £1000 or less;
• announcing a new review in which HM Treasury and HMRC, working in partnership with business, will look at how to simplify the corporation tax calculations and returns for smaller companies.

Revisit small companies tax procedures and filings
Budget 2008 announces a new simplification review which will look at how to simplify corporation tax calculations and returns for smaller companies. It will only focus on companies with fewer than 10 employees and less than £750,000 turnover.

At present companies in the UK have to prepare statutory accounts in accordance with generally accepted accounting practice (GAAP), and file these, or an abbreviated version, with Companies House. They are then required to make a number of adjustments to the profit shown in these accounts in order to calculate and report their corporation tax liability in accordance with the taxes acts.

The administrative burdens of complying with these two requirements are proportionately more significant for smaller companies, who have the least capability or resources to cope. This review therefore aims to explore the feasibility of simplifying obligations and procedures for smaller companies in calculating their corporation tax liabilities.

Knotting Sainsbury review with science and innovation
The science and innovation white paper will outline significant progress in implementing the Sainsbury review's recommendations. The white paper will also set out DIUS' forward strategy for promoting innovation.

The budget outlines key commitments including:

• proposals on how to ensure government procurement promotes innovation;
• the development of an independent innovation index to measure innovation throughout the economy;
the piloting of a further education specialisation and innovation fund;
• a doubling of the number of knowledge transfer partnerships supported by the technology strategy board.

The budget also announced that the government will invest £10 million over five years in ‘project enthuse’ to support the professional development of science teachers in all secondary schools, working in partnership with business and the Wellcome Trust.

Smart meters to encourage the energy services industry
Energy service companies (ESCOs) promote energy efficiency by providing information, finance and energy saving measures. ESCOs can help businesses identify ways to save money and lower their emissions.

Budget 2008 announced that the government will:

• develop voluntary agreements with energy suppliers to provide and promote energy services;
• raise awareness amongst businesses of the energy services industry;
• roll out smart meters to medium and large businesses;
• lead by example to help develop the market through innovative procurement.

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© Chilli Publishing Ltd 2008		15 MAR 2008