It wasn’t for small business, says Simon Sweetman, but it was one which actually considered small business...

The Chancellor took the opportunity of the PBR to talkabout small business and its importance to the economy. The truth of the matter is that most of the changes will have a remarkably small effect on the individual small business. It’s all about the psychology and the symbolism.

Take the postponement of the increase in the small companies’ CT rate: a postponement of a 1% increase. Begin with the proposition that the great majority of small businesses are wholly unaffected because they are not limited companies: then consider that most small companies do not pay CT, or pay very little, because they need to withdraw most of their profits as salary - a 1% change in the rate makes little difference, except to those right at the top of the small company profit range (who are presumably the people who need it least). Also, it will be a long time before it gets through: if your accounting year ends on 31 March the change will affect you at the end of December 2009. The Treasury believes that this will save business £460 million in the first year, but to save £1,000 you need to make £100,000, and if you’ve got a CT profit of £100,000 you’re probably not in much danger of going bust.

So what about the 2.5% cut in VAT. If that is to help business it will be either because a business maintains its gross prices and pockets the reduction, or because lower prices help increase turnover. But this is a cut in the shop price of just over 2%. There is far more variation than this in prices. A quick search of price comparison sites on any electrical item will show variations of between 25% and 75% in the current price. How will anyone notice a 2% cut here (let alone have any idea whether it’s been passed on)? Also, the change is disruptive, especially for retailers who have their goods individually stickered.

The cut is negated by the 2p on fuel duty. Yes, prices are coming down (rather more slowly than they went up), but the price of diesel, which is what matters to business, remains inexplicably high. A temporary cut in fuel duty on diesel would have helped (yes, all right, I do drive a diesel car).

The extension to loss relief – even if only for a year – is good news. It is especially good news that on this occasion the government has remembered that there are unincorporated businesses as well, for which this could be much more important, simply because their profits and losses represent the whole of the business result.

One piece of undeniably good news (especially for contractors, who are not finding life easy at the moment as contracts dry up) is that there is no income shifting legislation for another year – it will not be in FA 2009. With the next PBR likely to be in the shadow of the next election, has it gone for ever ?

The increases in NIC are unwelcome – at the FSB we had asked for a cut – but it does seem to have escaped the media’s attention that this does not come in until April 2011.

Given the immense difficulties encountered by anyone trying to access the right person in HMRC Receivables, the new HMRC Business Support Service to allow affordable timetables for businesses in temporary financial difficulties, with a single point of access, is already some improvement - we shall see whether attitudes have changed.

We shall also see how far small businesses can really profit from better access to public procurement, but at least there is access.

Finally the government has actually dared to suggest an increase in taxes for the rich. For those of you who still believe this is a rabidly red government, consider this - it will be fourteen years since the election when Labour got in when they have finally offered to tax the rich, if not exactly until the pips squeak. If this is the march to socialism, it’s a very long march indeed.

Whether the review of UK governed offshore financial centres will produce anything remains to be seen. But it will have the OECD and the incoming President of the USA on its side. The Channel Islands and the Isle of Man might want to look at a spot of economic diversification (but then these days who wants to rely on a trade in financial services ?).

So a verdict: it wasn’t a PBR for small business, but it was one which actually considered small business. That’s something.

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