2011 Budget: The Mentor View
George Osborne's announcement of his budget for 2011 will mean
some significant changes for SMEs. Here's the Mentor overview from
our Employment Law & HR and Tax experts.
Employment Law & HR
Cutting red tape for micro businesses
The chancellor confirmed the earlier announcement by Vince
Cable's Department of Business, Innovation and Skills, that there
would be a three-year moratorium on "new domestic regulation" for
businesses employing fewer than 10 employees from 1st
April 2011.
Unfortunately, this does not appear to apply to
previously-announced regulations, which include the abolition of
the default retirement age and the right to additional paternity
leave for new fathers, both effective from April.
In addition, the moratorium does not apply to regulations
emanating from the European Union – an example includes the Agency
Workers' Regulations, still due to come into force on
1st October 2011.
Finally, George Osborne confirmed that the Right to Request
Flexible Working arrangements would not be extended to parents of
17-year old children and the Right to Request Time Off for Training
would not be extended to employees of SMEs employing fewer than 250
people in April, as previously announced.
No Dual Discrimination law
George Osborne also announced that the provisions in the
Equality Act outlawing "Dual" or "Combined" Discrimination would
not now come into force in April as previously expected.
These provisions were aimed at helping those sectors of society
which suffered particular disadvantage – such as (for example)
Muslim women – because they are discriminated against on the basis
of a combination of characteristics.
Up to 50,000 additional apprenticeships and an
additional 80,000 work placements for young people
George Osborne announced funding for an additional 80,000 work
experience places.
There will also be funding for a further 50,000 apprenticeship
places, of which 10,000 would be specifically aimed at SME
businesses.
Tax
Abolition of certain tax reliefs
In the name of "simplification", the Chancellor announced the
scrapping of tax relief enjoyed on certain employee benefits.
However, the taxation of the "benefits", which include luncheon
vouchers, late night taxis home, and the provision of free
breakfasts for one-off "cycle to work days" will provide an
additional administrative burden for employers, who will have to
deduct the tax, as well as impacting many low-paid workers.
Reduction of CT rates
In earlier budgets, the full rate of corporation tax was set to
fall by 1% per annum until financial year commencing 1 April 2014
when it would be 24%. Mr Osborne announced that an additional 1%
cut would apply for financial year 2011 so the rate will be 26%
rather than then 27% previously announced. By 2014 the rate will be
23%.
The rate for small companies from April 2011 reduces from 21% to
20%.
Merging of income tax and NIC
The Treasury department is to open consultation on the
possibility of integrating the collection of income tax and
National Insurance. This could be a welcome relief to employers who
are charged with the task of operating two separate regimes on
their payroll payments. There could be real savings on
administration costs if this merger takes place.
It would probably be a fairly complex exercise as there are
anomalies between the 2 systems, and exemptions from NICs, for
example to those who have reached retirement age, would need to be
retained.
Investment reliefs
Improvements to the reliefs available under the enterprise
investment scheme (EIS) and venture capital trusts (VCT). In
particular:
- the thresholds for the size of qualifying company have been
increased to fewer than 250 employees (previously 50) and the
company having no more than £15m gross assets before the investment
(previously £7m)
- the maximum amount that can be invested in the EIS/VCT company
increased to £10m (from £2m)
- the maximum amount that an individual can invest through EIS
increased to £1m (from £500k).
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