The details have yet to be announced, but the Chancellor announced that there will be tax relief to companies for the costs of intellectual property, goodwill and other intangible assets.
For small businesses earning up to £54,000 per year, VAT will be abolished. Those with a turnover up to £100,000 will have VAT set at a lower flat rate. SMEs with a turnover up to £600,000 will be consulted on a simplified scheme. Corporate tax rates remain unchanged.
Gordon Brown announced a consultation on tax credit for research and development in large companies.
Companies that offer shares to employees will benefit from tax breaks, to help them attract and retain staff. Companies with assets of less than £15 million can now, under the Enterprise Management Investment (EMI) scheme (introduced last year) grant share options to the value of £3 million (up from £1.5 million). Previously, only 15 employees in any company could be eligible for the scheme, but there is now no limitation.
However, despite industry hopes, national insurance on share options will remain. All staff can now benefit from share schemes provided the options conform with the EMI scheme. Capital gains rate for employees in all types of company was reduced from 40p to 10p.
Off-shore internet bookmakers will lose their competitive advantage over high street rivals. The success of off-shore internet gambling services was cited by Gordon Brown as the reason for his decision to abolish gambling duty from 1st January 2002.
Stephen D. Lane, partner and head of corporate tax with Masons, the law firm behind OUT-LAW.COM, said of the Budget:
“The Chancellor yesterday announced several measures which will assist in the development of information and technology companies. The limit for the Enterprise Management Incentive scheme has increased to £3m in value of shares under option. A new tax credit is to be introduced to encourage increased expenditure on research and development and innovation by large firms. There will be a new regime for giving tax relief for the cost of intellectual property, goodwill and other intangible assets. We wait with interest to see the technical detail behind the proposals outlined.”