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Budget 2014 preview: what effects will it have on UK businesses?

Tuesday March 18th, 2014

Picture showing George Osborne Budget 2014 predictions

Chancellor George Osborne will deliver his Budget 2013 on Wednesday 19 March, but what effects will the upcoming announcement have on UK businesses?

At last year’s Budget, the Chancellor’s plans were heavily geared at building a stronger UK economy with help for UK businesses to create jobs and deliver lasting prosperity. Amongst these announcements was a £3 billion increase in capital spending a year from 2015 to 2016 and making the UK tax system the most competitive in the G20 by reducing the main rate of corporation tax by 20% – the joint lowest level in the G20.

As the UK’s economy is gaining momentum, some accountants think that this year’s Budget could be relatively quiet as the Chancellor may wish to save his ammunition for next year’s Budget, just before the next general election which is scheduled for May 2015. Some changes have already been scheduled for the 2014-15 tax year which are being consulted on before the detail is settled.

So what do we expect to see from the budget that will affect British businesses?

Economy

At this year’s budget, the Chancellor may get a chance to deliver some good news. It’s likely that the Office for Budget Responsibility will upgrade its growth forecast from 2.4% to 3.4% which beings it in line with the Bank of England’s forecast. Added to this the economy is likely to return to its pre-2008 peak sometime later this year.

Business taxes

The corporation tax is being cut from 23% to 21% and is to go down again to 20% in April next year. This applies to companies whose profits are more than £1.5 million.

Business rates will also be cut next month, and a relief for small companies has been extended to April 2015.

Deloitte do not expect any significant announcements regarding business rates, however, they feel setting up the wider review hinted at by the Prime Minister and the Chancellor would be welcome as business rates raise £27 billion – some 4.5% of total tax receipts.

Businesses will be keen to hear the Government focus on tax breaks in return for investment. Businesses can offset investment in furniture, offices etc, in amount of £250,000 a year, however this is due to expire in 2015. In this case, business lobby groups are looking for an extension. Businesses have also declared a desire for air passenger duty, which can be as high as £400 per person, to be frozen. This will ensure that Britain remains an attractive and affordable place to come and do business.

Manufacturing

Britain’s manufacturers have been clear about what they want. Their industry body, the EEF, says in its Budget submission “escalating” energy costs must be addressed.

It has some specific measures in mind, one being a reduction in the carbon price floor, or the carbon tax. As this is designed to encourage investment in green energy, the EEF says this accounts for 10% of the electricity bill of big industrial firms.

Aside from energy, manufacturers are said to be keen for the Government to invest further in skills training schemes.

Interested in knowing more?

Stay up to date with announcements of the Budget 2014 with Tracker on twitter at @TrackerIntel and on the Tracker blog.

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