Budget - A Small Businesses View
Following the budget yesterday I have decided to write a brief article summarising the key points that will impact on our small business clients in the short term.
In his speech Mr Darling promised to help small businesses and said he was providing a £2.5bn package for this. His plans include:
• A One year cut in business rates for small businesses. The cut will be effective from October 2010 and is aimed at helping 500,000 small businesses. Eligible small businesses occupying properties with rateable values of up to £6,000 will pay NO business rates and business occupying premises with rateable vales between £6,000 and £12,000 will receive significant reductions in their rates. More information on how this is going to work in practice will be available shortly.
• Doubling the Annual Investment Allowance (AIA) for small businesses from £50,000 to £100,000. This looks great on paper however the reality is that the majority of small businesses will not benefit as they will not incur this much capital expenditure.
• Introducing a 100 per cent first year allowance for new and unused zero-emission goods vehicles a period of five years from April 2010. This will provide a great tax break if the available vehicles are fit for purpose. Additionally commercial vehicles already qualify for the current AIA which in effect provides relief at 100 per cent already.
• Doubling the limit for relief on capital gains tax for entrepreneurs to £2m. This may benefit a serial entrepreneur who builds and sells 'many' businesses but I would suggest will not benefit the majority of businesses as most small businesses would be unlikely to sell for anywhere near the original £1m limit let alone the new £2m limit.
• Extending the business payment support helpline which effectively gives business owners time to pay their taxes without incurring any additional surcharge or penalty.
He also said that Lloyds and RBS (the part state owned banks) would provide additional funding of £94bn to small businesses which is great in principle however the proof will be in the banks carrying out this promise and providing much needed affordable funding to small businesses.
Without a doubt this was a political budget which in reality only delayed the pain. There was some tax breaks for small business in the short term whilst the reality is that in the long term taxes will rise. At the end of the day the whole process could be repeated again very soon if the Conservatives gain power at the forthcoming election.
The Conservatives have already pounced on the announcement to ‘freeze’ the basic personal allowance at the current rate of £6,475 stating that when inflation is taken into account this announcement effectively creates a ‘stealth tax’ which could cost 30 million tax payers an additional £50 a year.
Also ‘frozen’ was the starting point at which Inheritance Tax is paid and again in the longer term when taking inflation into account this will result it in an increase in the tax take.
There was also an announcement that from 6 April 2011 HMRC will also be able to ask for security payments from business owners before the business is permitted to operate a PAYE scheme. This is an add on to the rules that allow the same for VAT. The Tax Office tends to demand such payments where the business owners have previously been involved in a business that failed owing VAT.
A detailed budget report can be viewed on our website. ww.crumppearce.co.uk
This summary is designed as a guide only and Crump Pearce and Co can not accept any liability for any action taken as a result of reading this article. For detailed advice please contact your professional advisor.
Member since: 28th January 2011
I am a Chartered Certified Accountant and director of Crump Pearce & Co a local firm of accountants, business advisors and tax consultants.