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Budget is a let-down for small business says ACCA

ACCA (the Association of Chartered Certified Accountants) is disappointed that so few of the action points recommended in its recent tax and small business manifestos have been addressed by the Chancellor in his Budget.

ACCA's Budget 2005 microsite

Glenn Collins, ACCA Head of Business Advisory services, said: "Nearly half of the 20 issues ACCA identified as requiring government action to help SMEs and general taxpayers could have been directly actioned by the Chancellor today. But there were only minimal steps taken on stamp duty and inheritance tax, while other crucial areas were left completely untouched. He has not put small businesses first."

Some of the areas the Chancellor ignored were:

• Intellectual Property Rights - despite Mr Brown's emphasis on the knowledge economy there was no action to encourage the majority of SMEs who fail to register their IPR.
• Tax compliance costs - small businesses pay almost 60 times as much per employee in this area as multinationals. The emphasis on tax credits and reimbursing employers for student training costs may increase this.
• Capital Allowances - where last year's Budget abolition of allowances for investment in IT will cost SMEs over £350m and has not been reinstated.
• Nothing has been done to overcome the particular barriers that women entrepreneurs face - and which stop 150,000 enterprises being created each year.
• The discriminatory regime against companies that need for good reasons to disincorporate has been left untouched.

Glenn Collins added: "On the positive side, the Chancellor's commitment to improving business education for 16-18 year-olds should be a welcome boost to reviving entrepreneurial spirit in the UK.

"While we support the Chancellor's incentives for small businesses to use a simplified flat-rate VAT regime, and having a single point of contact within the tax authorities for SMEs, the underlying burden of compliance still rests on the shoulders of small businesses."

He added: "The proposal that the Regional Development Agencies will develop and deliver focused coaching for new and existing businesses with high-growth prospects is encouraging - but until now the RDAs have not always engaged sufficiently with the private sector. They must not work in isolation, or this initiative will not succeed".

ACCA welcomes the move to merge government agencies with watchdog briefs over business from 35 to 9, as fragmentation of the UK public sector over the last 25 years has failed to make best use of resources. But it should be noted that the benefits of re-organisation will come in the longer term, as the initial costs of the change process will be substantial.

To complement and accelerate this process, ACCA urges the Chancellor to proactively encourage the extended use of shared services throughout central and local government. Research that ACCA has conducted in this area confirms the cost effectiveness of this approach. It should not be the case, for example, that the hundreds of government agencies in the UK currently have different IT systems. The UK should follow the example set by those countries which are implementing integrated financial management throughout government.

For full details of ACCA's tax and small business manifestos - both launched earlier this week - go to www.accaglobal.com homepage.

Stamp duty, Inheritance tax changes do not go far enough says ACCA

The Chancellor's moves on stamp duty and inheritance tax - while welcome - represent missed opportunities to fundamentally reform the injustices in both these important areas says ACCA.

Glenn Collins, Head of Advisory Services at ACCA, said: "On stamp duty, rather than purely raising the threshold from £60,000 to £120,000, the system really needs a root and branch revamp to become similar to the Income Tax system, where only the amount over each threshold band is subject to tax at that rate, not the full property price.

"For example, under the new band threshold, a home costing £121,000 will be subject to 1% tax on the full property price, resulting in a Stamp Duty liability of £1,210. A fairer system would be that only the £1,000 over the £120,000 threshold would be subject to the duty, resulting in only a £10 charge."

Collins added: "Similarly, the Chancellor's decision simply to raise the inheritance tax threshold from its current level of £263,000 to £275,000 fails to go far enough. The threshold should now stand at £390,000 * if it had been increased in line with house price inflation and we are disappointed that the Government has not chosen that figure.

In its tax manifesto published this week, ACCA urged the Government to extend to inheritance tax the exemption that applies currently to the individual's main residence under capital gains tax. Making the main residence exempt from inheritance tax would remove one of the greatest inequities of the inheritance tax system and reduce the burden on ordinary taxpayers and their families.

For more information please contact:

Ian Welch, ACCA Head of Corporate Communications
020 7396 5729/07739 862928

Colin Davis, ACCA Head of International Communications
020 7396 5738/07720 347713

June Deasy, ACCA Public Relations Manager
020 7396 5751/07736 800393

Samantha Jones - ACCA UK Press Officer
+44 (0) 20 7396 5989 / 07885 328 769

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