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100% right
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Tue, 13/12/2005 - 15:23 |
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Anne Porter is bang on when she says:
"What is more important though, is an accountant’s ability to carry out proper “what if” analysis based on what will almost certainly become law. This is important not only for those companies which have understood what the Government is trying to achieve but also for those who will be oblivious to its consequences on their business, whether positive or negative. It is this sort of foresight and service that small businesses need and should expect.”
The trouble is there is too much uncertainty around against which to make sensible value judgments. But there is an upside. The UK remains one of the best places to start up business anywhere in Europe.
Related links
PBR – Back Pedalling on NCD
While it is tempting to throw up your hands in disbelief at the incredible number of U-turns, alterations and amendments which have taken place within the corporate tax regime in recent years, the reality is that for the small businessman, there are serious and confusing ramifications. The burden is on their accountant, as their principle tax advisor, to smooth out this confusion and to be able to give as accurate, predictive advice as possible.
In 2004, the Government issued a consultation paper on the tax and incentive structure for businesses. It’s purpose was to evaluate methods of incentivising companies to retain profits and ensure the tax structure was fair to not only incorporated businesses but also sole traders and partnerships. Ironically this was issued when the NCDR was brought in!
The results of the paper were released in conjunction with the pre-budget report. Three possible solutions were outlined; abolishing the NCDR and retaining 0%, leaving the system as it stands or removing the NCDR and the 0%. The Government has opted for abolishing both the NCDR and the 0% citing that this would be fairer to all businesses, not just those who choose to incorporate. The incentive for growth and reinvestment now comes in the shape of capital allowances. The 40% FYA on plant and machinery has been increased to 50%.
This will obviously benefit a greater number of businesses through the UK but will it encourage businesses to retain profits to reinvest and grow? Companies benefiting from the 0% tax rate would have £10,000 tax free profits. This now means with an overall 19% small companies rate, these companies will have a serious outlay to derive a similar advantage. Of course, in turn this raises the questions about whether this is discriminating against the smaller business that is without the financial ability for this type of investment.
What is more important though, is an accountant’s ability to carry out proper “what if” analysis based on what will almost certainly become law. This is important not only for those companies which have understood what the Government is trying to achieve but also for those who will be oblivious to its consequences on their business, whether positive or negative. It is this sort of foresight and service that small businesses need and should expect.”