Small and medium-sized enterprises (SMEs) have been given some relief by the Pre-Budget Report 2008 - but it comes at a price for many, according to experts at Vantis, the AIM listed top 13 UK accounting, tax and business advisory group.
The Chancellor outlined a £7 billion package of measures aimed at helping small and medium-sized businesses in his Pre-Budget Report announced on 24 November 2008.
Terry Baldwin, Head of Corporate Tax at Vantis, says: “On the face of it, several measures will undoubtedly be welcomed by many companies, but the potential benefits risk being diluted by the detail.
“Businesses may not benefit by as much as they first think, once they have balanced all the measures against one another and look at the timescales involved. The aim of easing the tax burden on SMEs could be partially achieved, but it may not prove to be on a large enough scale to provide the much-needed stimulus.”
Terry comments as follows on the main measures affecting SMEs’ tax bills:
Delaying Corporation Tax increase for one year
“Deferring the increase in Corporation Tax by 1p in the £1 to 22% is clearly welcome, but won’t be felt in cash-flow terms until 2010 at the earliest because tax is not payable until nine months after the company’s year-end.”
Reduction of VAT from 17.5% to 15% from 1 December 2008 until end of 2009
“The headline-grabbing reduction in the main rate of VAT could turn out to actually leave businesses out of pocket. With just a matter of days to change the VAT they charge, retailers and other businesses will incur significant costs and aggravation in revising price tagging systems, software and printed material, such as catalogues and menus, at no obvious benefit to themselves.”
Offsetting losses of up to £50,000 for three years instead of one
“The ability to carry back losses for up to three years is helpful, but only applies to year ends between 24 November 2008 and 23 November 2009. Some businesses may be tempted to change their year-end to ensure that a larger amount of their loss is eligible for relief. Limiting the carry back to losses of £50,000 means that the greatest impact will be felt by smaller businesses.”
Help with paying tax bills
“Potentially, one of the most immediately helpful changes for businesses was the Chancellor’s proposal to allow businesses’ the ability to pay tax liabilities on a timetable that they can afford.
“Unfortunately, very little detail is available and it appears to amount to the suggestion that if you’re worried about being able to meet tax, NIC or other payments, you can get in touch and discuss payment options. It remains to be seen how sympathetic HM Revenue & Customs will be and what criteria will be used, but it is clear that interest will continue to be charged on tax paid late!”
For more information about how Vantis can help you and your business, please complete and submit the online form below.