Supplementary memorandum from Government
Office East Midlands (EM 34)
BUDGET 2009 UPDATE
The background to this year's Budget is unprecedented:
the financial crisis has caused a steep and synchronised global
downturn, while business confidence has fallen to historically
low levels.
This year's Budget includes more government support
for business, which complements the major steps already taken
to restore the flow of credit in the economy.
This includes a £750 million strategic investment
fund to support advanced industrial projects of strategic importance
consistent with BERR and DIUS' strategic vision for securing Britain's
competitive future, outlined in the Building Britain's Future:
New Industry, New Jobs[45]
paper published on Monday 20 April.
BUDGET MEASURES
FOR BUSINESS
The 2008 Pre-Budget Report announced a temporary,
one-year extension of trading loss carry-back for businesses from
one to three years, for losses up to £50,000. To support
more businesses through the downturn, this temporary extension
will now apply for two years from 24 November for companies, and
for the 2008-09 and 2009-10 tax years for unincorporated businesses.
These changes are expected to give around 140,000 loss-making
businesses greater tax repayments to support their cashflow.
HMRC's new Business Payment Support Service offers
help to businesses facing temporary financial difficulties over
a timetable they can afford. The service has already helped more
than 100,000 businesses. From 22 April 2009, it is being expanded
to allow businesses that expect to make losses to offset these
against tax bills due on profits from the previous year, and which
they are unable to pay.
Recognising the constraints that reductions
in the level of credit insurance can create on cashflow and working
capital, the Government has announced a "top-up" trade
credit insurance facility. This short term measure responds to
the needs of businesses—with up to £5 billion of targeted
support to cushion against the financial impact of a reduction
in credit insurance cover. It will provide greater breathing space
for businesses to respond effectively to increased risks in their
supply chain and will be open to businesses of all sizes and in
all sectors trading in the UK. Eligible businesses that have had
their credit limit reduced will be able to purchase top-up cover
via their existing credit insurance provider, who will administer
the scheme on Government's behalf. The scheme will be implemented
from 1 May.
To further support trade and short-term cashflow,
the Export Credit Guarantee Department (ECGD) will consult shortly
on a new facility to provide Government support for short-term
trade finance, sharing with banks in confirming letters of credit.
The facility would give exporters greater certainty of payment
when selling goods in difficult markets. Before the summer, the
Government will also review further areas where ECGD could provide
support for exporters, to help them deal with the consequences
of instability in financial markets.
To give a boost to the car industry during the
current downturn, the Government has announced a vehicle scrappage
scheme. A discount of £2,000 will be offered to consumers
buying a new vehicle ten years or older, which they have owned
for more than twelve months. The Government will set aside £300
million for this scheme, with funding matched by manufacturers
participating in the scheme. The Government will work with industry
to introduce the scheme next month.
SECURING BRITAIN'S
FUTURE
Over the last decade, the UK has built up key
strengths that provide a platform for growth as the UK emerges
from the recession. The Government's strategic vision Building
Britain's Future: New Industry, New Jobs, published on Monday
20 April, identifies how government action can support the UK's
economic renewal and future growth. Budget 2009 announces a package
of measures that support this strategy:
To ensure the UK is in a stronger position to take
advantage of opportunities as the global economy returns to growth,
the Government will establish a £750 million Strategic Investment
Fund to support advanced industrial projects of strategic importance.
£250 million of this fund will be earmarked for low-carbon
investments, a further £50 million for the Technology Strategy
Board and £10 million for UK Trade and Investment.
To encourage investment, the Government will
introduce a first-year capital allowance of 40% for one year,
with effect from this month. Firms investing over £50,000
in qualifying plant and machinery in 2009-10 will benefit from
a higher rate of tax relief on investment. The 95% of firms that
currently invest up to £50,000 each year will continue to
benefit from the Annual Investment Allowance that enables business
to offset their capital expenditure against taxable profits.
Working with representatives across the business
community, the Government will examine the balance of taxation
of innovative activity including intellectual property. The Government
will assess the evidence, consider further with industry, and
set out its assessment and proposed approach before the 2009 Pre-Budget
Report.
The 2008 Pre-Budget Report announced reforms
to the taxation of foreign profits, representing a move towards
a more territorial system of taxing foreign subsidiaries. The
Budget announces the introduction from 1 July of an exemption
from tax for foreign dividends received by all companies. This
will be supported by a limited restriction to the interest deduction
rules, which have been refined following discussions with business.
It will be introduced for accounting periods starting on or after
1 January 2010.
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