An exciting day as ever when the Chancellor, Alistair Darling announces the budget. Well, at least that’s what we expected. It was effectively a little bit dull with nothing significant happening (unless you drink Cider!) This has been commentated as being an election based budget to ensure Labour remain in power. We will see!
As is the norm, PAH Accounting have prepared a review of the key factors which affect small business, including commentary and opinion on the effect it can have. Feel free to post your own comments or ask questions.
The chancellor kicked off proceedings by stating that ‘At it’s heart this budget is a package to invest in small and medium business‘. This is a key point and certainly seems to be the case.
Taxation
There were no increases to Income Tax, Corporation Tax, VAT or National Insurance. This is naturally a good thing; however, there were also no increases to the personal allowances.
Business Rates
As from October business rates are to be cut.This will lead to a tax reduction for 500,000 small firms in England. Many businesses will be exempt from payment of business rates altogether.
Annual Investment Allowance
The annual investment allowance, which was introduced to replace first year allowances, has been doubled to £100k. This means that small businesses will be able to claim tax relief on the majority of it’s capital purchases in the first year.
Access to borrowing
This budget introduced great initiatives to aid small businesses to obtain necessary borrowing. The main issue is that banks are being encouraged to lend more, inparticular the state subsidised banks, Royal Bank of Scotland and Lloyds have agreements to lend £94bn, of which at least half will be to small and medium sized firms.
A credit adjudication service has also been set up so that any rejections for finance can be reviewed by an independent panel. The intention is that where funding has been unfairly denied a business can appeal. This is already being rejected by the banks as unworkable (hardly surprising).
Fuel duty
As anticpated the fuel duty is set to rise by 3p; however, this will now be staggeredby raising it by 1p in April, 1p in October and the final penny in January 2011. This will represent yet another increase for businesses. Petrol stations rarely reduce their costs. Fuel is at an amazingly high rate at the moment and even non-transport led business is starting to feel the pinch.
This may also be a good time to review how you are claiming your motoring costs. For a long while the mileage method proved beneficial; however, it may be that claiming the cost and disallowing a private percentage is now better.
Business Payment Support Scheme
The time to pay system has been well received by many small businesses. It was agreed that this arrangement is to be extended for the whole of next parliament. Whilst this is a good thing it should be noted that HM Revenue and Customs see this as a short term fix for small businesses. There have been instances of firms being rejected any extension as they are not in trouble but obtaining extended credit facilities.
Summary
As stated above this really was an election based budget. There are definitely some incentives for the lower earners i.e the majority of voters! with high earners being taxed even more.