Speculation about what George Osborne had in store for post-recession UK ended with the announcement of the budget on Wednesday 23 March 2011.
For recruiters, the highlights of the budget are likely to be as follows:
- Corporation tax is to be reduced in April 2011 by 2% and will continue to fall by 1% for each subsequent year until 23% is reached. This will mean the UK will have the lowest corporation tax of the G7 industrialised countries.
- There will be a 3 year moratorium on the application of new domestic legislation for businesses with 10 or fewer employees and “genuine new start ups”. Whilst full details have yet to be published, it appears unlikely that this will apply to the Agency Worker Regulations 2010, as they are the result of a European directive, which must be implemented into UK law by December 2011.
- The planned extension of the right to request flexible working to parents of children aged under 17 (which was set to come into force in April) and the forthcoming ‘right for employees to request time to train’ is also likely to be scrapped (subject to a public consultation).
- Funding for the creation of 21 new enterprise zones where low rates apply and super fast broadband will be available.
- The current temporary increase in business rate relief offered to small businesses will be extended to October 2012. This is a relief available to small businesses who occupy non-domestic premises with a low rateable value.
- Business mileage allowance – this will be increased from 40p to 45p per mile for the first 10,000 qualifying business miles.
- Fuel – the plan is to introduce a ‘Fair Fuel Stabiliser’. The fuel duty escalator will be removed for the length of parliament whilst oil prices remain high. There will be a delay in a rise in accordance with inflation until next year. Fuel duty was also cut by 1p per litre.
- Personal tax allowance is to rise from £7,475 this year and then to £8,105 in April 2012.
- Statutory Maternity Pay – small employers will still be able to recover 100% paid, but the additional amount of 4.5% which can be recovered on top of the 100% as compensation for the employer’s share of National Insurance contributions will decrease to 3% from 6 April 2011.
- Tax simplification and tax avoidance – the coalition Government are seeking to scrap 43 complex tax reliefs removing 100 pages from the tax code document. They will also publish a paper on the efforts to be made to clampdown on tax avoidance. Details of these proposals are not yet clear, but amongst other things the new paper may well set out new codes for enforcing IR35.
- There will also be a consultation on the possible amalgamation of income tax and National Insurance which will remove the current complications that employers deal with when paying these two separate taxes.
George Osborne made it clear that this budget was set to encourage growth in the UK and send the message that “Britain is open for business”. The budget overall is fairly tame and this is to be expected in the current recovery from recession and focus on reducing public spending and fiscal debt.