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Pleasant Budget surprises for SMEs

24th Mar 2010
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The budget contained a couple of nice surprises for small businesses, but perhaps the government won’t be quite as nice when the election is out of the way, argues Simon Sweetman.

So, what was in it for you? Those who wait for plums from the Budget are generally doomed to disappointment, so no holding back on NIC increases - but it was never very likely. This was never going to be a tax cutting budget.

Regulars may know that I am a fan of the Annual Investment Allowance. The increase in the AIA to £100,000 will affect a relatively small number of businesses (those with capital expenditure between £50-100k) but they may well be a crucial sector. It may actually enable genuine investment by that minority of small businesses who want to invest and grow.

When I was told that he might double entrepreneurs’ relief from CGT I assumed that meant CGT rates were going up, but no.

This of course allows the chancellor to pitch himself as a champion of small business, as the Tories are talking about abolishing AIA and cutting the main rate of CT – which of course helps big business. I suspect this is the big idea here, because nobody wants to go into an election tagged as a friend to the banks.

Very importantly (and despite constant rumours to the contrary), the business payment support service is to continue (through, says the chancellor, the next parliament). An independent review is to be required, but only where debt exceeds £1m. Not a problem for small business, then.

Usefully, the extended loss carry back provisions will be extended for another year, both for income tax and Corporation Tax. That (hopefully) takes them close to the end of their useful lives – anyone still making large losses by then is likely to have gone out of business!

The long awaited simplification (and improvement) to the Associated Companies rules is still on the agenda, but not until 2011.

The abolition of the furnished holiday lettings provisions will go ahead. HMRC has been unusually unwilling to listen to suggestions here, and expected clarifications have not yet surfaced. This will be a mess.

There is to be a new tax relief for the video games industry (subject to details, consultation with Europe), since this appears to be the one industry where Britain still leads the world. Will video games become the new film investment scheme?

We are promised that by the end of 2011 a business will be able to see all its tax liabilities etc in one place online. I think there is a special category for promises based on IT (pre-broken, perhaps). The same may be true for the promises about high speed broadband.

Overall, there was no harm done to small business, and some improvements - but we know that we will have to wait for somebody’s Finance Act No.2 for this year, and with the election out of the way they may not have to be nice to us.


Replies (6)

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By NeilW
24th Mar 2010 18:32

Small company tax really makes no sense at all

If you look at it from a public policy point of view (rather than the viewpoint of a client who understandably hates contributing to the exchequer), then the small companies corporation tax rate is an anathema (as is the Annual Investment Allowance, although I have less issue with that).

What we actually need is taxation based upon accounting profits, and actually a *higher* rate of tax for smaller companies. The general policy principle being that if you invest you pay less tax at the higher rate, your investment causes the company to grow and you will pay less tax as your investments mature into larger annual profits.

Growing companies in theory create more jobs (policy tick there), and having a lower corporation tax rate for higher rate both give companies an incentive to grow  larger profits and also helps with international tax competition (policy tick there).

The current system actually discourages people from growing their companies past a certain size, discourages using appropriate commercial structures and only really makes sense to those who are hard of accounting.



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By pnown
24th Mar 2010 20:16

lossextension carry back

 Sorry Simon but cannot seem to find anything in 2010 budget releases etc re extending the loss carry back  for another year could you point me in the right direction please

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By terry morris
25th Mar 2010 09:58


I did not see any news about the vat threshold, I assume that the £68,000 2009 limit still applies. 

Could force many small business's into compulsory registration...thats helping small business's, I do not think.

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By pnown
25th Mar 2010 10:04

VAT threshold

 VAT threshold has increased to £70,000 BN 45

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By Gina Dyer
30th Mar 2010 16:21

Answer for pnown

Apologies for the delay in getting back to you on your question about the loss extension carry back. It seems there's a bit of a tale to tell there.

HMRC was little unclear in giving advice on this, but they have now issued a response which Simon has fed back to me.

It seems the announcement about this was actually made in Budget 2009, which was of the existing legislation.

The existing legislation (for companies, for a temporary period of two years (accounting periods ending after 23 November 2008 and before 24 November 2010) losses of those two twelve month periods may be set off against the total profits of the previous three years, up to a maximum of £50,000) and for unincorporated business for 2008/9 and 2009/10.

Hope this answers the question.

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By pnown
31st Mar 2010 12:08

Extended loss relief

 Thank you for confirming that I had not missed any new announcement but for any other readers for clarity purposes re the existing FA 2009 rules summarised above

- the extended loss carry back of 3 years is unlimited for the immediately preceding period then capped at £50,000 overall for the other 2 years for both companies and individuals.

- the carry back for  individuals is not as far as the extended 2 years is concerned against anything other than trading profits 

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