(24 March 2010)

Commenting on what today's Budget holds for businesses and individuals, Sue Bonney, Head of Tax at KPMG Europe LLP, said: "There was no surprise that, despite the need for the Government to reduce its borrowing, the Chancellor did not announce any dramatic tax hikes in his final Budget before the general election, nor did he announce any radical programme of large scale transformation for the public sector. It's also unfortunate that today's Budget contained no radical thinking on the taxation of the corporate sector."

"This is disappointing given that the Chancellor recognised that one key element in repaying the country's debt will be growth of the economy and business is, after all, the engine of that growth. This is a missed opportunity in our view, although perhaps not surprising. At a time when there have been a number of warnings about the UK lagging behind in terms of its tax competitiveness, and when businesses have been voicing concerns about the complexity of our tax system, it is a shame that some of the key issues such as rate reduction and simplification seem to have been pushed into the long grass for now."

Election give aways for small businesses

The Chancellor used his budget to unveil a raft of new measures intending to improve the cash flow situation of SMEs. However many of the Chancellor's good intentions won't actually come into play until next year; which could be too late for some of the businesses that are struggling now warns David Bywater, tax partner at KPMG.

"The amount of time that the Chancellor's speech spent addressing the issues facing SMEs demonstrates that he does recognize the value that they have to UK economy and that after two years of tough economic condition and with income dead, access to cash remains a priority. The main bank lenders into the SME sector (RBS and Lloyds) have been mandated to lend at least £47 billion to struggling small businesses which is great news and the Chancellor also signaled that he is encouraging competition to the small lending sector with the introduction of new banks; offering a further life line to SMEs.

"Other government support was offered in the form of a new venture capital fund with £200 million committed to providing additional capital to SMEs and he also introduced some specific tax measures to help with cash flow with the extension of the Time To Pay scheme - throughout the life of the next parliament which will be crucial as businesses try to stave off cash flow pressures as they grow out of recession. The annual investment allowance will reduce tax bills and simplify the tax regimes for a large majority of businesses.

"However, whilst doubling the entrepreneurs' relief to £2 million and not interfering with the current low rate of 18% Capital Gains Tax are both helpful in encouraging investment and keeping the UK competitive; the Chancellor could have gone further and relaxed the rules to deliver entrepreneurs' relief to angel investors. The relaxations to the VCT and EIS schemes will make it easier for certain businesses to raise equity capital, and these measures are welcome.

"Whilst the Chancellor did spend time talking about the Government's commitment to encouraging more jobs in the SME sector, his failure to address the National Insurance Contribution increase from April 2011 remains a very direct tax on employment and will hit when the UK economy is still attempting a strong forecast recovery. And with the reduction in business rates for hundreds of thousands of businesses not kicking in until October 2010, many of the Chancellor's good intentions could come too late for some businesses for whom the most risky time is that period of growth; post recession."

Proposed green bank won't fix the problem

Nick Chism, Head of KPMG's Global Infrastructure practice comments said that the Government's £2bn capital sum proposed offers only a fraction of £400bn UK needs in infrastructure investment over the next ten years

"It's good to finally see infrastructure on top of the government's agenda. A 'strategy for national infrastructure' and the establishment of a Green Investment Bank - a single government body responsible for evaluating, assessing and backing infrastructure investments can only be a good thing. However, the proposed fund only covers a fraction of the estimated £400bn the UK needs in infrastructure investment over the next ten years."

"A long-term infrastructure investment strategy will have to include new and better ways of cooperation between the private and public sector in order to ensure the UK's long-term global competitiveness."