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NEWS 16 March 2016

Budget 2016 - What does it mean for SMEs and large companies?

This year's Budget Statement offers more support for small businesses, but what does it mean in reality?

Commenting on a series of measures in support of SMEs in today’s Budget announcement, Martin Hook, Managing Director of Ayming, the leading international business performance consulting group, says:

“Anything that encourages and helps SMEs to cut costs and reinvest those savings to spur business growth should be supported.

“The Chancellor’s decision to cut business rates, reduce the rate of Corporation Tax, reform stamp duty land tax for commercial properties, and overall efforts to simplify the business tax system, should all be warmly welcomed by SMEs.

“But there is a fly in the ointment. The decrease in Corporation Tax will reduce the benefit that many profit-making SMEs derive from R&D and could potentially give businesses less incentive to make an R&D claim. Of course, if the incentives for companies to invest in R&D are in anyway diminished then there’s a significant risk that investment in innovation will suffer.

“Large businesses, in contrast, will welcome the Corporation Rate reduction as it will actually increase the benefit these business can claim under R&D Expenditure Credit.

“In addition, new powers allowing HMRC to collect, share and publish information about State Aid delivered through the tax system, means that SMEs need to be especially vigilant about reporting if they have received State Aid during the year.

“Clearly the devil will be in the detail on how the Government’s announcement on offsetting profits will impact the R&D scheme. We expect it to only affect around 1% of companies and only those businesses with a large pool of losses built who suddenly have an exceptionally high level of profits.”

Commenting on the Government’s proposed changes to cracking down on VAT evasion, Martin says:

“The proposed monitoring adds administrative and compliance burdens making it even more important to get things right to avoid penalties and assessments from tax authorities.”