"The economic landscape has changed dramatically since the proposal to increase the small companies' rate of Corporation Tax from 19% to 22% in the 2007 Budget. Rather than deferring the increase from 21% to 22% until April 2010, as announced in the Pre-Budget Report (PBR) last November, it would have a much greater impact on small and medium companies if the rate reverted to the original 19% for the financial year just ended, because the tax on those profits will be payable in 2009.
"Small and medium businesses create many jobs in the UK, and in some ways it would seem more sensible to raise the extra taxes the Chancellor needs by increasing expenditure-based taxes, such as VAT and excise duties, which are payable on people's discretionary expenditure, rather than imposing it on the profits of small and medium businesses struggling to survive.
"Businesses which do survive this year should see the cash-flow benefit in 2010 of the delay to the 1% rise."
Offsetting losses up to £50,000 for three years instead of one - extended for another year but sum not increased
"The proposal to extend the loss carry back from one to three years is welcome, but of limited impact due to the £50,000 limit. Increasing the limit substantially in this Budget - perhaps to £300,000, the small companies' rate threshold - would have significantly helped businesses which are incurring losses. For companies without profits in the last 3 years, it would have been helpful if a tax credit for losses had been introduced in much the same way as those companies who benefit from spending on Research and Development ."
Investment allowance increased to 40%
"The one-year re-introduction of a 40% first year allowance for expenditure on mainstream plant and machinery is helpful for businesses that can afford to invest more than £50,000 in this way. I question how many businesses in the Tees Valley will be celebrating over a tax relief worth 8p for every pound spent in excess of £50,000."
15% VAT rate still to change from 31 December this year
"There was a plea from businesses, especially retailers, to move the changeover date away from December, traditionally their busiest period. This appears not to have been heeded, and so there will be an additional pressure - as well as cost - to many businesses who will already be extremely busy generating a good Christmas and January sales period to turn things around."
Unemployment
Despite the Chancellor’s aim to provide stimulus for jobs many of the regions’ employers will be wondering where the good news is on employee costs. The NIC hike announced in November has not been postponed and the uplift will be an added extra burden for large employers.
Full details of the Budget can be found at: http://www.hm-treasury.gov.uk/bud_bud09_index.htm
www.vantisplc.com
Contacts:
Martin Barber, Vantis Head of Tax, Northern Region - Tel: 01642 221 331. Email: martin.barber@vantisplc.com
Vantis office in
Middlesbrough- New Exchange Buildings ,Queen's Square,Middlesbrough TS2 1AA
Darlington -1st Floor, North Point, Faverdale North, Faverdale Industrial Estate Darlington, County Durham, DL3 OPH
Hartlepool - 17/25 Scarborough Street, Hartlepool, TS24 7DA
About Vantis plc
Vantis plc is one of the UK's leading accounting, business recovery and tax advisory groups focused on servicing UK SMEs and high net worth individuals. The Vantis group offers a range of specialist skills split across three business units including: Business Advisory (Accountancy, Taxation, Business Advice, Customs Duty Recovery & Advisory Services, Forensic Accounting & Dispute Resolution, Outsourcing, Management Consultancy, Company Secretarial); Business Recovery (Business Recovery, Restructuring Services & Asset Finance); and Consultancy (Corporate Finance and Independent Financial Advice).
The Vantis group currently has over 1000 staff operating from 17 locations
throughout England.
For more information about Vantis, visit: www.vantisplc.com
Vantis Group Ltd, a Vantis plc group company, is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities.