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The recruitment sector has broadly welcomed some of the measures to support small business and cut business tax announced in the Budget.
The Chancellor of the Exchequer announced to Parliament that alongside developing new degree-level apprenticeships, the government is to extend the grants for smaller businesses to support more than 100,000 extra apprenticeships.
George Osborne also announced that the government would cut business rate taxes. From 1st April, corporation tax will stand at 21%, down seven percentage points since 2010. It will reach 20% next year and employees under the age of 21 will be taken out of jobs tax altogether.
The Association of Recruitment Consultancies welcomed the announcements so far as they relate to supporting businesses. However it added that Osborne should have made changes to the VAT charges for the supply of agency workers to non VAT-registered organisations such as government departments, local authorities and charities.
“Agency workers are a specific resource that should be readily available to all these organisations, but the inability to recover VAT deters their use as VAT is currently chargeable on the pay provided to the worker,” said Adrian Marlowe, chairman of ARC.
This is particularly so, ARC maintains, in the case of the NHS in respect of which HMRC has in February embargoed the recovery of VAT where agency workers are used.
“All these organisations need every penny they have to provide the services they are required to deliver on increasingly tight budgets,” Marlowe added. “Whilst the Treasury recovers the VAT, and as such this helps towards the deficit, public services are affected not just by imposed budget restrictions but also by this tax.”
The REC’s senior policy adviser, Ben Farber, said the doubling of the annual investment allowance for business is definitely a good thing for recruiters, adding: “Overall it was a decent budget for business and workers today, with moves both to shore up growth in major UK employment sectors and ensure work pays for individuals of all income levels.
“New investment in STEM skills and creating more apprenticeships is welcome and shows that the message about skills shortages in key growth areas is beginning to be heard by policymakers, though there is still much more to be done.”
The Chancellor also announced that the tax-free personal allowance will increase by £500 to £10,500 in April 2015.
“I’m particularly pleased that the personal allowance has been raised,” said Chris Smith, CEO Opinio Group. “This, in conjunction with the recent rise [from £6.31 to £6.50 an hour] in the National Minimum Wage makes it more beneficial for people to find a job rather.”
Smith welcomed the announcement of over 100,000 apprenticeship places, but added that they must lead to real jobs. He also said more needs to be done to cut the red tape involved in employment law.
Osborne also announced that the Employment Allowance of a £2,000 cash-back on jobs will be given to every business in the UK, and the Investment Allowance will be doubled to £500,000 and extended until the end of 2015.
“99.8% of businesses will get a 100% investment allowance,” Osborne said. “It costs £2 billion in the short term – so when we say: ‘we’re going to get Britain investing; when we say we’re going to back growth around the country’ – we mean it.”
The Office for Budget Responsibility has forecast that the economy will grow by 2.7% in 2014 and 2.3% in 2015, and it predicts that employment will rise to 31.4 million by 2018.
A deficit that reached 11% of GDP in 2009-2010 is now forecast to fall by half to 5.5% this year, and will be eradicated by 2018-2019.
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