Gordon Brown, Chancellor of the Exchequer and holder of the UK government’s purse strings, outlined his first full budget plans as Chancellor on Tuesday, and many aspects of the budget will give a timely boost to the UK’s IT entrepreneurs and small businesses. It was a budget brimming with plans to encourage investment and invention. The full rate of tax on large corporations will drop by a penny to 30%. But for the small company, or start-up (approximately 85% of UK companies fall into this band) the rate will drop even further to just 20%. This makes it a 3% total fall in small company tax since Gordon Brown took over at the treasury. Brown claims these rates to be the lowest for any major industrialized country. Advance corporation tax, or ACT, will be abolished as of April next year, easing the cash flow troubles of companies wishing to pay a dividend. Added to this, small companies will no longer have to pay part of their yearly tax bill early, by installments. Companies are also being encouraged to invest in plant and equipment, with 40% of the cost now available as an expense against tax in the first year of ownership (previously as low as 20%). There were also measures to reduce the cost to small firms of taking on new employees. Brown said the aim was to encourage enterprise and ‘entrepreneur-ship’ throughout the economy. Among the more innovative changes revealed in the speech were a fund to help universities exploit their inventions, and some tax incentives to discourage short termism in equity investing. British Universities will have access to a 50m pound venture capital fund, which Brown hopes will prevent clever UK inventions being forced abroad to become the manufacturing successes of rival countries. Meanwhile, those people who build up a business with their own hard earned money as Brown put it, will be rewarded when the sell out (albeit after a minimum of ten years) by a rate of Capital Gains Tax of just 10 pence in the pound. And for people who invest in more general stocks and shares, those who hold on to their investments for ten years or more will be rewarded with a 16% cut in the tax levied on their gains. Brown also acknowledged how far the UK’s venture capital industry lags that of the US, and to encourage private investors, he has proposed a 50% increase in tax relief for investment in venture funds. Brown summed up his plans by saying he was sending a signal of support to those who wanted to invest in the UK, when you are ready to start out, start up, start investing or start hiring – this government is on your side he said.
