• Welcome to the LegalBeagles Consumer and Legal Forum.
    Please Register to get the most out of the forum. Registration is free and only needs a username and email address.
    REGISTER
    Please do not post your full name, reference numbers or any identifiable details on the forum.

Pre-budget report: Tax breaks

Collapse
Loading...
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • Pre-budget report: Tax breaks


    A package of measures to help small businesses struggling with the credit squeeze and the rapidly worsening economy was broadly welcomed yesterday.
    The chancellor, Alistair Darling, presented the initiatives as a £7bn package of loan guarantees and tax cuts, and said the government was providing "real support, quickly, for all types of small business".
    It is setting up a £1bn loan guarantee scheme to ensure banks keep lending to small companies, and a further £1bn will be made available to back loans for exporters. Small firms would also be allowed to spread their tax payments if they ran into difficulties.
    A planned increase in corporation tax for small companies, which was due to take effect in April, has been deferred. Small businesses will be able to offset losses against the past three years' profits, instead of just the previous year, which Darling said would benefit 75,000 businesses.
    He is setting up a new lending panel, made up of representatives of government, lenders, trade bodies, consumer groups, regulators and the Bank of England. It will look not only at new lending, but also at how banks handle existing customers who get into difficulties.
    But it wasn't all good news for small business owners. The government plans to increase national insurance payments by half a percentage point in 2011 and some complained that the reduction in VAT from 17.5% to 15% would hurt cash flow and be an administrative headache, while having little effect on sales.
    Darling said that seven UK banks had applied for £1bn of £4bn made available by the European Investment Bank to UK banks for loans to smaller companies, and the money should be available by the end of the year.
    "This is a comprehensive package of support which business has been asking us to provide," said Darling. "A package to support business, worth £1bn of tax cuts, £2bn in loan guarantees, along with £4bn of European money. A £7bn package of measures, real help."
    Dawn Elliott, a small businesses tax partner at KPMG, said: "It is nice to see several things being done for small businesses, but it is probably not enough unfortunately. The measures could take some time to come through and the funds being made available are small given the size of the market."
    According to the government, net lending in a normal year to small and medium sized companies is around £4bn-£6bn.
    She said the flexible tax payment programme was very welcome. "In the last recession, a lot of companies said that it was trying to pay the taxman that sent them over the edge."
    Darling said businesses would have as long as they needed to pay their bills, including VAT, national insurance and corporation tax, and the chief executive of Revenue & Customs, Lesley Strathie, promised businesses would get a "sympathetic response" should they run into problems. David White, the managing director of Weboptimiser, a search engine marketing company in London, said the flexible approach to tax was the best piece of news on offer.
    The £1bn is being made available through the small business finance scheme and is being aimed at otherwise solid companies struggling to raise working capital in the credit squeeze. The government will guarantee bank lending of up to £1m, with the aim of giving the banks more confidence to lend. The terms for the scheme will be unveiled in the new year. The additional £1bn made available for small exporters through the Export Credit Guarantee Department is in part a response to the withdrawal of credit insurance, which is making it more difficult for exporters to do business.
    "Smaller firms are the lifeblood of the British economy and it's crucial we support them if we are to ride out this economic storm," said the business and enterprise secretary, Peter Mandelson. A further £50m will be made available as equity investment to struggling small firms in a fund set up within the government-funded Capital for Enterprise.
    The small business finance scheme is in addition to the small firms loan guarantee scheme, aimed at start-up firms finding it otherwise difficult to attract investment.
    The government announced in 2006 that the rate of corporation tax would be raised for companies with less than £300,000 profits from 19% to 22%. The tax change for smaller businesses is being phased in over several years. It is currently at 21% and had been due to rise to 22% in April next year.
    Darling also responded to concerns about the tax on empty properties, designed to get empty buildings back into use. He said that for 2009-10, empty commercial properties with a rateable value below £15,000 would be exempt, covering 70% of all empty properties. There have been warnings that some property owners were simply choosing to demolish their properties, rather than pay the tax.
    John Walker, the national policy chairman at the Federation of Small Businesses, said: "Many of these measures, such as giving businesses longer time to pay bills and offsetting losses, will give small businesses a welcome breather from the taxman and allow them to concentrate on sustaining their businesses."
    Main points

    • The government will guarantee bank lending up to £1bn to small firms.
    • A separate £1bn guarantee facility for small export firms.
    • Rise in corporation tax for small businesses due in April deferred.
    • Struggling small firms will be able to spread tax payments.
    • Banks have drawn down £1bn from a £4bn facility made available through the European Investment Bank for small business customers.
    • Empty commercial property with a rateable value of below £15,000 will be exempt from business rates.



    guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds

    More...

View our Terms and Conditions

LegalBeagles Group uses cookies to enhance your browsing experience and to create a secure and effective website. By using this website, you are consenting to such use.To find out more and learn how to manage cookies please read our Cookie and Privacy Policy.

If you would like to opt in, or out, of receiving news and marketing from LegalBeagles Group Ltd you can amend your settings at any time here.


If you would like to cancel your registration please Contact Us. We will delete your user details on request, however, any previously posted user content will remain on the site with your username removed and 'Guest' inserted.
Working...
X