"Our aim must be that Britain becomes the world's leading location for research-based, science-based and knowledge-based industries," said Chancellor Gordon Brown in his ninth Budget speech yesterday, which confirmed an increased Government commitment to research and development.
The Government will be announcing a consultation on the proposed R&D Tax Credit during the summer, according to the Chancellor. The Government will also try to encourage the growth of small tech-intensive firms with a guaranteed £100 million share of public sector research contracts.
The Chancellor also said that the Government would offer funding incentives for universities that opened their research facilities to business.
"Today's Budget is halfway to getting it right for the knowledge economy," said John Higgins, Director General of Intellect, yesterday. "However, in my view this Budget has failed to provide UK firms with the incentives they need to invest in training and still fails to offer sufficient incentive to firms considering the UK as an R&D base. Through its failure to improve the Home Computing Initiative it has also failed to adequately help the section of the population which is at most risk from digital exclusion."
"Our message to Government now is: you'll have to do more than that if you want to make any impact on the UK's competitiveness – to fail at this is not an option," he added.
Other Budget highlights:
Barriers to Enterprise
Stressing the need to lessen the regulatory burden on businesses while still ensuring high standards, the Chancellor confirmed a risk-based regulatory policy that would encourage business inspections where there is more risk, but take a lighter approach where there is less risk.
To this end, said the Chancellor, the Government will reduce the existing 35 inspection bodies in the consumer and trading standards, food safety, countryside, agriculture, animal health and environmental protection, health and safety and insolvency sectors to just nine.
SME single tax account
The Chancellor was also keen to simplify the VAT system for small businesses, and announced a future consultation "on a single tax account for small business where information need be provided only once, a single point of contact for both VAT and corporation tax, and flexible payment options".
"Seventy thousand firms no longer have to provide forms that account for every VAT transaction but make just one calculation and pay one flat rate. Working with the Chambers of Commerce we will encourage take up among the 600,000 companies now eligible to benefit from this VAT simplification," he added.
Corporation tax
The main rate remains frozen at 30% for 2005/2006 and 2006/2007. The small companies' rate also remains static at 19%, with thresholds remaining at £300,000 and £1,500,000.
VAT thresholds
As from 1st April, the thresholds for VAT registration and deregistration will be increased. The annual taxable turnover limit will be £60,000 for registration, and £58,000 for deregistration.
VAT "rounding up"
Large businesses will no longer be able to use the benefit of "rounding up" – a benefit that allows businesses with a small amount of exempt activity to avoid any disallowance of overhead VAT as a result.
Patrick Walker, head of Indirect Taxes at PricewaterhouseCoopers, commented: "The removal of 'Rounding up' for large businesses will lead to an additional VAT cost for many – perhaps as much as 1% of overhead input VAT could be disallowed."
