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Budget: Relief for small business may prove ineffective

Posted by Internet Guru
April 25, 2009

The effect of a sharp rise in capital allowance for small businesses could be undermined by other measures introduced in today’s Budget.

The Chancellor said today that tax relief for small business investment in plants, machinery, transport and offices would be doubled to 40 per cent “to bring forward investment” for companies “in the growth sectors that will deliver the rewarding jobs in the future”.

Alistair Darling also extended the Government’s “carry-back” scheme to 2010, allowing loss-making businesses to reclaim taxes on profits of up to £50,000 made in the last three years.

Chas Roy-Chowdhury, head of tax at the Association of Certified Chartered Accountants, said: “The announcement about carry-back is very helpful because cash is king in this financial crisis.”

However, the rise in tax duty – which will add 2p to a litre of petrol from September and a further 1p above inflation from each April for the next four years – was criticised by the Federation of Small Businesses (FSB), who argued that it would hurt many “road dependent” smaller businesses.

There was also disappointment that the temporary cut in VAT from 17.5 per cent to 15 per cent is going to end in December this year after it was introduced just before Christmas in 2008.

Tom McGinness, head of middle markets in London at KPMG, the accountancy firm, said: “Smaller

businesses are ultimately looking to survive in today’s difficult climate. Their needs are simple – more cash and less administration. Overall the Chancellor’s Budget could have done more to stimulate growth and confidence.”

John Wright, national chairman of the FSB, said: “In what has been the most crucial budget in decades, the FSB is disappointed that small businesses have been largely ignored.

“With a quarter of business failures due to late payment and around £38,000 owed to small businesses at any one time, Companies House should have been given more powers to name, shame and fine companies which fail to pay on time. The Government has missed an opportunity to save thousands of businesses and the jobs they create.”

While the VAT incentive to drive people out on to the high street will end this year, retailers will gain from Mr Darling’s move to provide £5 billion of additional trade credit insurance to businesses which have had their level of cover reduced.

If companies, retailers in particular, do not have insurance it can impede their ability to buy in stock and put them under pressure to settle payments with suppliers – a situation that has become more common since the UK economy began to slow and fall into recession.

Under proposals in the Budget, companies will be able to buy six months of “top up” insurance from the Government between May and the end of the year.

timesonline.co.uk

Small Business

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