The government’s immediate one per cent cut in corporation tax is “not that significant” but plans for further reductions have been welcomed by a London facilities management firm.
Chancellor George Osborne used the Budget to cut the headline rate of corporation tax and claimed it was the best advertisement of how competitive a place the UK was to do business.
The rate was due to fall from 26 per cent to 25 per cent in April, but this will now be driven down further to 24 per cent from next month. Osborne also outlined plans to cut the rate next year and the year after, giving Britain a corporation tax rate of 22 per cent in 2014.
Incentive FM managing director Jeremy Waud said: “It was announced that corporation tax will be reduced by one per cent and for an SME making profits of say £500,000 a year it will only save them £5,000, which is not that significant.
“Having said that, corporation tax under Labour was 28 per cent and the Conservatives aim, I understand, is to bring this down to 22 per cent over time, so this is a very positive move and will ultimately benefit the business community.”
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The government’s National Loan Guarantee Scheme (NLGS) offers SMEs with a turnover of up to £50m to access loans at one percentage point lower than they otherwise would have done.
However, Waud believes the real problem is not with firms receiving loans at unattractive rates but that SMEs are unable to secure finance from the banks in the first place.
Waud said: “This is potentially a brilliant initiative, however the offer as we understand it is that it will not manifest itself in giving more security as the banks will only lend if you have a strong enough balance sheet or other personal assets as security.
“This means you could be running a great business but if the balance sheet looks weak, the banks will not lend no matter what. Instead, we should be using this guarantee to provide security for the first two years or the early part of the loan to enable people to invest in their business, be it research and development or acquisitions or service expansion.
“The banks need to be encouraged to lend, taking the interest rate down by one per cent is neither here nor there.”