Emergency Budget: Small business tax summary

A round-up of the key small business tax measures. Keep your eyes on this page as we'll be updating it throughout the day.

 

 

Corporation tax rates

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Comments

NIC relief for new start-ups

Briar | | Permalink

So, should we close down all our clients (and ourselves!) and start them up again?

johnjenkins's picture

NIC

johnjenkins | | Permalink

I already made this comment when this ridiculous plan was first conceived.

Then they moan about tax avoidance!!!!!!!!!!!!!!!!!

Looks like this lot haven't learned anything from the last lot.

johnjenkins's picture

NIC

johnjenkins | | Permalink

Anyone seen that advert "Brand new customers only"

Giles M's picture

NIC avoidance

Giles M | | Permalink

I'm afraid that wouldn't work. They've specified it must represent an entirely 'new economic activity'.

I hope they have excluded directors

ringi | | Permalink

I hope they have excluded directors and the main share holder + any connected people.    Otherwise the problem this we bring about will make IR35 look like small fish.

This may get be to employ staff sooner

ringi | | Permalink

I am thinking of starting up a company, not having to pay NI on staff wages may get me to consider taking on staff sooner.   So this may just work….

Wild Billy's picture

Why is it necessary to exclude Directors?

Wild Billy | | Permalink

How many Directors pay themselves a significant enough salary to breach the employer NICs threshold?

 

Open it up further, but...

Briar | | Permalink

If the objective of the measure is to create employment outside of London and the South East, then it should be an easy job to allow existing businesses (with less than 10 employees), as well as new start-ups, to take advantage of the relief. It should also be possible to devise anti-avoidance rules to prevent abuse of the relief. After all, it is more likely that existing small businesses will seek to expand their operations (and hence the number of employees) than brand new start-ups (which by experience take longer to get going). If the major reason for the relief is to create employment why exclude existing businesses? Also, on a cynical note, is the relief merely targeted at those civil servants who might lose their jobs and create new businesses which will then take over the activities which they have previously carried out? That is, new companies will be formed to sell their services to government/local government. They will receive the NIC relief (worth £50,000 over 5 years). It is likely that public spending will go up as result!!! For example, there is an announcement in the Budget that HMRC will begin to employ debt collection agencies to collect unpaid tax. If I was a tax collector, I would leave HMRC (or get made redundant with the added benefits), set up a debt collection agency, and sell my services to HMRC. I would receive up to £50,000 in NIC relief and be doing the same job as I was doing before - a net negative effect on the economy. 

chrischapman5's picture

Accelerate startups

chrischapman5 | | Permalink

I agree, I'm working with several startups at www.mybusinessfd.com, who are on the verge of incorporating so this is welcome news, albeit amongst a sea of other mixed messages.

Chris

www.mybusinessfd.com

 

Wild Billy's picture

Accelerate start-ups... but it must be "new economic activity" r

Wild Billy | | Permalink

Not sure whether you mean you work with existing businesses or people who are literally about to start-up? I don't think an existing business that incorporates is likely to be eligible based on the reference to "new economic activity".

New Economic Activity

Briar | | Permalink

Let's see how they define a "new economic activity". If a new entity is formed the company is legally separate from it's predecessor. Therefore, the new entity is carrying out a new economic activity. Inless there are some complicated rules to somehow link the previous operators with the new. (ansd even then there will no doubt be avoidance opportunities). As I have already said, let's do away with the "new start up" business relief and extend the relief to any small business which is seeking to expand by employing new people. This is more likely to achieve the objective of increasing employment in the small business sector and no complicated anti-avoidance rules will have to be imposed on us.

johnjenkins's picture

Unfair

johnjenkins | | Permalink

Again we have a government that says one thing and does another.

DC has said he wants a fairer tax system. What's fair about new business getting this sort of tax break where others are struggling to keep the employees they already have?

The Federation of small business should take action.

Two minutes in power and the potential to spark one of the biggest tax avoidance schemes has been born.

Where's The South-East?

Robert Clubb | | Permalink

Can anyone tell me where the South-East begins and ends?

Where does the South East begin?

Briar | | Permalink

To us 'oop north', south of the Mersey ! (and Cheshire is as well!!!)

johnjenkins's picture

Soth East

johnjenkins | | Permalink

It's where DC and GO decide it's going to be.

Director's NI

ayjay3 | | Permalink

The honest ones!

New Enterprise outside London and the SouthEast

lisler | | Permalink

Yippee, I'll have an office outside London and the South East but I'll sell my products and services to clients and customers in London and the South East.

Or have they thought of that? 

johnjenkins's picture

outside London and South East

johnjenkins | | Permalink

What makes you say that they might have thought of this? Coming up with such an unfair hair-brained scheme like this makes me realise that this hasn't been thought through.

I'm all for helping new business but not at the expense of established ones trying to their heads above water.

As for only honest directors paying themselves over the nic threshold - cbuywggcbbhchchge!!!!!!!!!

Surely

mikewhit | | Permalink

It will be up to HMRC to 'deem' what is new activity, looking at the reality of the activity, rather than allow 'disguised' or 'sham' new activity.

Or am I getting mixed up with something else.

johnjenkins's picture

"disguised or sham" activity

johnjenkins | | Permalink

When an unfair scheme of this ilk hits the streets some businessess will feel let down. This is where "clever dicky" Accountants step in and say "hang on we've looked at the rules and if you do this, this and that you will be able to claim all the goodies".

The intention of the scheme, ie. to get new business up and running, is good but again no thought is given to how that process should be achieved without hurting established buisness.

The answer is to get the financial institutions, via the bank of England, to invest more in home grown business instead of using every conceivable excuse not to lend.

Wild Billy's picture

Let's not jump to conclusions

Wild Billy | | Permalink

Let's assume that this has been thought about and see if we can untangle it. I think there are always reasons, even if we disagree with them, and it is an interesting intellectual exercise if nothing else on a Thursday night.

We seem to be complaining that it is only available to start-ups and not all businesses. Why has the Government done that? I will guess it is because it wants to encourage more people to start up new businesses and take on staff. It has talked about a decade of enterprise so, rightly or wrongly, it has introduced a policy to encourage that. It may not also be unreasonable to say that start-ups are more exposed to struggling with costs early on so helping them will mean more survive and prosper. Not to say existing businesses aren't struggling too but surely extending it to all businesses would be far more costly- perhaps prohibitively so?

What about the regions? Well, I don't know. Maybe there is a dearth of start-ups outside London and the South-East? Maybe unemployment is greater outside those areas? Maybe private sector employment is lower in those areas? All could be legitiimate reasons for taking a regional approach. I remember Osborne talking about helping regions prosper that normally get left behind. Again, maybe extending it across the country would be prohibitively expensive?

I have no doubt there will be complex legislation alongside this to prevent some of the things people have commented on. The reaction here shows why. When the Government has limited finances it is not going to tolerate mass avoidance schemes, particularly when it is trying to stimulate private enterprise. We can take two views of that: either we applaud the Government for trying to help start-ups or we cry "unfair" and "sham" and automatically look for ways to abuse the system. Maybe we could start a petition to ask the Government NOT to introduce the scheme and save the taxpayer £1bn? That seems to be the prevailing mood, although not sure how the 400,000 start-ups expected to benefit would feel about that?

It's a sham

Briar | | Permalink

Some good points made by "Wild Billy" but on tonight's Question Time Vince Cable has said that the new relief is designed for small businesses. No it isn't! As we have discussed it seems to be only for new start ups. I suspect, as mentioned before, that it is for ex-civl servants to start up businesses doing much what they were doing before (without the attached bureaucracy) but as independent businesses. There might be a (very) few genuine new start ups. But surely existing small businesses looking to expand are in a much better position to create jobs by expanding (with government help) than brand new start ups? Allowing the relief to these existing small businesses would enable the supposed (and professed) objective of the relief to be fully realised (if that is truly the objective) and no complicated anti-avoidance rules would be necessary. If this is not the case then it's a politically grabbing headline and therefore a sham.

johnjenkins's picture

thought about?

johnjenkins | | Permalink

Who has been consulted on this????????? Does anyboby know anyone who has??????????? Ah hang on isn't this where the "Independant Advisors" come in. Who are these people that have furnished us with this budget??????

Where does the figure of 400,000 new start-ups come from???????

Sorry for being cynical but we've had to endure 13 years of Tosh and this lot haven't given me any grounds for believing that it will change.

I would have had far more respect if GO had said. Amnesty and no penalties for 12 months to get our house in order and allow tax payers to put their affairs in order.

This would also give GO & co time to consult with HMRC front line staff and perhaps talk to us.

I believe that the Government will hive off certain functions with ex-civil servants being able to set up business with lots of goodies. Very unfair Mr Cameron!

 

Small business startups

mikewhit | | Permalink

If they want to encourage startups, I recall the Enterprise Allowance and related schemes, in the mid-80s, appeared to give good results.

Or "that was then, this is now" ?

johnjenkins's picture

"Enterprise Allowance"

johnjenkins | | Permalink

I remember it well and still have a few clients who started on it.

If I remember right you had to be signing on for 3 weeks, go on a one day seminar and then you would be elligable for £60 a week for 12 months.

Brilliant idea, but like all brilliant ideas fall by the wayside.

NIC AVOIDANCE

david5541 | | Permalink

THERE IS ALREADY PLENTY OF NIC AVOIDANCE WHICH THE PREVIOUS CHANCELLOR ADMITTED ABOUT TO THE BOYS IN THE CITY AT A TALK AFTER THE ELECTION.

 

MAYBE OUR POLITICIANS ARE AT THE BEHEST OF THE CITY CORPORATES JUST LIKE THEY ARE IN THE USA.

 

WHAT MOST AMAZES ME IS THAT OUR HMRC DEVOURS ANY PETTY NON COMPLIANCE BY SMALL CLIENTS BUT HAS NO INSIGHT INTO CORPORATE NIC AVOIDANCE.

 

iNIC AVOIDANCE HAS BEEN THE ONLY WAY FORWARD FOR MOST PEOPLE (& EMPLOYERS) SINCE THE LABOUR SOCIAL CHAPTER AND EMPLOYMENT/PAYROLL REGULATIONS (WHICH MADE THIS COUNTRY UNEMPLOYABLE AND JOBS OPEN ONLY TO ILLEGAL/TEMPORARY/TRANSIENT LABOUR FROM OVERSEAS WHO DONT CARRY ANY PENSION RIGHTS).