Missing ingredient

The tone of the speech, some of the wider initiatives announced in terms of
education and skills, and the apparent commitment to addressing some of the
fundamental issues dogging business give us cause for cautious optimism.

That said, the Budget contained relatively little in terms of new measures to
provide an instant fillip to UK entrepreneurialism.

HMRC is working alongside business and business representatives to develop
priorities for further action to setting targets and reduce the administrative
burdens on business. But against this, KPMG’s annual global cost competitiveness
survey shows that the UK’s competitive position has slipped from third to sixth
position. Although the UK remains ahead of the US, Japan and Germany, we have
been overtaken by France, Italy and the Netherlands. This needs to be addressed
if the UK is to foster entrepreneurial spirit.

In his Budget, the chancellor announced changes to the rules for the
introduction of real estate investment trusts and an increase in the number of
companies eligible for enhanced R&D tax credits – both of which should be
welcomed by business (although the reduction in time limits for the R&D tax
credits was disappointing). And there seemed to be a slowing in the introduction
of new complex anti avoidance rules.

In a strange quirk, given the stated aim of promoting enterprise, flexible
working and opportunities for all, HMRC announced that the Home Computing
Initiative is to cease from 6 April. We are struggling to understand the
rationale for this.

Certainty is a vital ingredient for entrepreneurialism. Another recent KPMG
survey revealed that 88% of UK large businesses identified clarity of tax law as
being important to where they choose to locate operations internationally,
compared to only 68% citing low tax rates.

Alas, the Budget contained little here. Leasing companies face fundamental
reform from 1 April and don’t have a complete set of legislation on which to
base their business plans.

We have more legislation across a wide variety of areas including insurance
companies, benefits in kind and VAT. Again we can expect a bumper edition of the
Finance Act this year.

In many ways the Budget was positive for UK enterprise – but many business
leaders in the UK will have been hoping for more.

Adam Bainbridge is UK head of corporate tax at KPMG

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