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Osborne Company Formation Friend or Foe

This week saw David Cameron’s coalition government announce its first budget.
Devised with the primary objective of addressing the huge budget deficit the UK economy faces, has George Osborne been ‘tough, but fair’ or are the much feared tax increases he proposes a step to far, especially at the point in the UK’s fragile economic recovery? We ask leading economist Ben Connolly for his thoughts on the coalition’s Emergency Budget;

“ First of all, I think it is important to mention that Osborne’s ‘Emergency Budget’ , did not contain any nasty little surprises for small businesses or the company formation sector; the rise in VAT was widely feared though hugely anticipated, as was the increase in Capital Gains Tax. However, while these policies may have been expected, in my opinion, their implementation may have a long term impact on the UK’s economic recovery, that may surprise even Mr. Osborne.”

“The rise in VAT by just 2 per cent, may, on the surface, seem like an unfortunate but necessary consequence of attempting to address the country’s massive debt. However, in the current economic climate, small businesses face two main challenges; low consumer confidence and the challenge of maintaining a good cash flow. I fear the rise in VAT will make both these challenges much worse.”

“Many small business owners felt that when Cameron announced his plans to cut public spending by £10 billion, the onus would fall on the private sector to stimulate recovery. Therefore, it was hoped that the emergency budget would make adequate provisions to support the small business sector. While, the rise in VAT and Capital Gains Tax may have left some company formation owner disheartened, it is important to remember that the budget did contain some measures devised to help the SME.”

“Corporation Tax has been reduced by one per cent and Osborne’s plan to make company formations outside of the south and south west exempt from paying the first five thousand pounds in National Insurance for their first ten employees, will no doubt help struggling companies and provide a much needed boost to employment in those areas.”

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