Industrial tax breaks and better access to funding are the biggest factors in a Budget designed for business.

Thursday 21 March 2013

Yesterday’s Budget was designed to bring business a serious boost, and contractors are likely to be among the big winners.

Many of the industries in which freelance and contract workers operate will enjoy welcome tax relief. The oil and gas sector, for example, will benefit from tax breaks to pull in early stage investment in shale gas - a move which has been roundly criticised by environmental groups, but which Mr Osborne claimed was vital to Britain’s long-term future in the energy industry.

Since oil and gas are already seeing unprecedented levels of investment, the government’s decision is likely to continue the current trend where strong demand for specialist skills is met with a severe lack of suitable candidates, meaning that many companies turn to contractors to provide their missing expertise.

Creative industries are also in line for relief. Animation and top-end television investment will be subject to tax breaks as part of an attempt to bolster the UK’s visual effects industry.

Figures from TIGA, the trade body for the gaming industry, demonstrated on Monday that the Games Tax Relief announced in last year’s Budget had contributed to a four per cent rise in employment in the sector and a leap in investment by studios to £427 million.

Access to funding has been one of the biggest concerns for businesses looking to expand. The Funding for Lending Scheme may have started slowly, but the chancellor announced yesterday that the government was working with the Bank of England to look into possible extensions of the programme.

It is also setting out plans for its new Business Bank, which will further increase the borrowing options available to those looking to take on new staff or otherwise invest.

Small businesses will particularly notice one of the Budget’s most significant plans. The first £2,000 is to be taken off every company’s National Insurance bill, which the chancellor said meant that a third of the country’s employers - 450,000 businesses - would pay no National Insurance whatsoever.

Companies will also see some dramatic reductions in corporation tax, which will leave the UK with the lowest business tax rate of any major world economy. Currently standing at 28 per cent, the rate will fall to 21 per cent in 2014 and 20 per cent in 2015.

Contractors who accept work from the public sector may be able to take advantage of better opportunities, too, since the value of government procurement contracts spent via the Small Business Research Initiative will rise fivefold.

Nevertheless, contractors may be disappointed by the lack of information on the subject of IR35 and other tax regulations. No new guidance has been mooted on how the public sector should deal with “off-payroll workers”, nor has any further advice been mentioned on exactly who will be subject to IR35 rules. After Professional Contractors’ Group called for clarity and honesty from the Treasury this week, it is unlikely that they will be pleased with the results.

This year’s Red Book is clearly directed at proving in Mr Osborne’s words, that “Britain is open for business”. But where the skills are lacking in the permanent workforce, contractors are in prime position to fill the gap.

By Victoria McDonnell

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