Brooksonís reaction to the Budget

Martin Hesketh, MD of Brookson Ltd comments on Alistair Darlingís maiden Budget:

ìOn the face of it, a lot of the high level aims announced by the Chancellor are very positive. However, the Government will need to follow up these warm words with concrete and positive action if it is to genuinely change the views of many regarding its previous lack of support for both freelance contractors and small businesses.

ìAlthough little in the way of firm proposals was announced, other than limited improvements to the tax regime around access to funding for small businesses, the Chancellor is promising to investigate ways of more strongly supporting small and medium size companies by reducing the regulatory administrative and cost burden from Whitehall, simplifying elements of the corporation tax system and improving the services HMRC provide to such businesses.

ìOf genuine interest is his announcement that the Government is committed to investigating the possibility of setting a target that 30% of Government contracts must be won by small or medium size businesses. Depending upon how the Government actually moves forward on this, this could deliver real and significant business opportunity to small and medium size businesses.

ìBrookson particularly welcomes the move by Government to postpone the introduction of Income Shifting legislation until 2009. This will allow for thorough consultation to ensure that any legislation in this area provides ëclarity and certaintyí for businesses and their advisors.

ìThis decision means that the ruling in the Arctic Systems case continues to represent the law in this area until any new legislation is enacted, which is welcome news for small limited companies in general, and many of our customers in particular.

ìConsequently, limited companies can continue to pay dividends to a second shareholder ñ at least for the time being. However, taking a cautious approach, we would advise that if that individual is not a spouse or partner in a civil partnership, businesses should protect themselves by ensuring that the second shareholderís contribution to the company can be clearly identified and valued. Such value also has to be consistent with any amounts paid to a second shareholder ñ as such circumstances fall outside those that were the subject of the Arctic Systems case.

ìAnother positive step by the Chancellor is the Governmentís ongoing focus on compliance standards across the service provider market place. In the Chancellorís Budget Report, the Government confirmed that it will be closely monitoring the tax relief claimed on travel expenses within umbrella service companies and, on the basis of this, will then decide what further action is necessary in this area. We welcome the Governmentís desire to see compliance standards rise across this industry ñ something that we have been highlighting for quite some time now as it is in everyoneís interest ñ contractors, agencies and service providers - that non-compliant practices are eradicated.

ìOn the whole,î Martin concludes, ìI think this is a good first Budget for small businesses and freelance contractors from Alistair Darling. I sincerely hope that the Chancellor will be sticking to his words.î