The coalition agreement and the Queen’s Speech

The coalition agreement and the Queen's Speech contained a number of legislative proposals that are likely to have an impact on small and medium-sized enterprises (SMEs).

Key proposals for taxation reform include:

·         A detailed agreement will be sought on taxing capital gains on non-business assets similar to income tax rates, with “generous exemptions for entrepreneurial business activities”. The rate of capital gains tax is likely to increase from 18% to close to 40% (or even 50%) on gains that do not qualify for the entrepreneurial exemptions.

·         The planned 1% rises in employer and employee National Insurance Contributions (NICs) will go ahead from April 2011, but the employer NIC threshold will increase by £21 per week.

·         A review of small business taxation, including IR35 (a rule to stop the avoidance of tax and NICs by using intermediaries (typically a service company owned by the “employee”)). The stated aim is to seek to replace IR35 with simpler measures that prevent tax avoidance but do not place undue administrative burdens or uncertainty on the self-employed or restrict labour flexibility.

·         Reform of the corporate tax system by simplifying reliefs and allowances and tackling tax avoidance to reduce headline rates of tax. No detail is provided in the coalition agreement as to how this will be achieved.

Finance

The government intends to ensure the flow of credit to viable SMEs. Consideration will be given to a major loan guarantee scheme and the use of net lending targets for the nationalised banks.

Pensions

There will be a simplification of the rules and regulations relating to pensions to help reinvigorate occupational pensions, encouraging companies to offer high-quality pensions to all employees. The government will work with business and industry to support auto-enrolment.

Employment

Although the coalition agreement does not provide a huge amount of detail on the government’s employment policies, it sets out a number of proposals that have an impact on this area, including:

·         Reviewing employment and workplace laws, for employers and employees, to ensure they maximise flexibility for both parties while protecting fairness and providing the competitive environment required for enterprise to thrive.

·         Encouraging shared parenting from the earliest stages of pregnancy. This will include a system of flexible parental leave.

·         Extending the right to request flexible working to all employees.

·         Promoting equal pay and taking a range of measures to end discrimination in the workplace.

Property and environment

The government states that the Energy Security and Green Economy Bill will deliver a national programme of energy efficiency measures to homes and businesses.

Commercial: alcohol retailers

The proposed Police Reform and Social Responsibility Bill will overhaul the Licensing Act 2003. It will provide local authorities and the police with stronger powers to remove licences from, or refuse to grant licences to, any premises that are the source of alcohol-related problems. The Bill bans the sale of alcohol at below cost-price and allows local councils to levy higher fees for late-night licences to pay for additional policing, as well as providing local councils with the powers to close down shops or bars persistently selling alcohol to children. The Bill also doubles the maximum fine for selling alcohol to children to £20,000.

Construction

The coalition government has also announced that spending on all Building Schools for the Future projects that have not reached preferred bidder stage will be frozen. The Department of Health has also placed on hold its timetable for implementing the new ProcCure21+ framework. Although the programmes have not been abandoned, the announcement is likely to stop (or at least delay) spending on dozens of projects worth millions of pounds. The decision will have a significant impact on the construction industry and is likely to affect contractors, sub contractors, suppliers and professional consultants.