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Some small businesses DO spend over £25k a year on capital equip
Please would the author and other parties note that for a small haulier, £25,000 goes nowhere when you need to buy a new HGV wagon. New trucks can cost well in excess of £50,000, with a second hand vehicle three years old still costing £30k - £40k easily.
As a small company employing eight, with nine trucks and three trailers on three to five year replacement cycles, we quite easily spend £40 - £50k per year on new equipment. There will be other small businesses which also have heavy capital commitment costs, so please spare a thought for us when you say that nobody would use an extended AIA.
Hardly encouraging investment and job creation is it.
I have to say that once again the rehetoric didn't match the action. Either the chancellor is hard of accounting or when he talks about 'business investment' he is talking hot air.
Slashing corporation tax rates merely encourages corporate profit stripping rather than reinvestment.. If he wanted companies to grow he would *increase* corporation tax rates at the low end, just allow companies to pay tax on the declared profit without any of this silly capital allowance nonsense and most importantly vastly reduce employers national insurance.
Not only that but I can't believe any world corporate makes decisions based on headline rates, so I don't understand where the pressure was coming from.
NeilW
I agee with the trucker
Its good to have a non practising accountant coment on here and it, for me was spot on. Other service sectors that will ultimately suffer are printers, small plant hire companies, or shall we say any sector that has machinery at the heart of its service.
The AIA was the only good thing to come out of recent budgets, and it has now effectively been taken away from many small BUSINESSES.
If I was more cynical, i would say that the government are trying to make it harder for the smaller business to set up and to continue to exist. Perhaps more small businesses will end up selling to medium size businesses and the only small business will be sub-contractors as their will be now employment.
FYA reduction
Why does everything have to re-named by the gonks that run our lives. What does it achieve? Ann Inv Allc = FYA in English?
Anyway I think reduction in AIA from 100k to 25k is a BAD idea as the reason for increasing it was to give small businesses the incentive to invest in things that make things. Which is really the only way this country will get out of recession, not by upping the government payroll or building more call centres.
Obviously FYA should only be available to businesses spending the dough themselves, so you don’t allow all the sly tax schemes using leasing arrangements which divert the FYA to the despicable banks etc, but that is not too hard to do.
FYA going too low
It’s like making suits for average sizes – no one exists that actually IS average because it’s an average! Same with Darlings waffle about 98% of businesses don’t need a higher FYA, it ignores the fact that within that there are probably 20% of the number of businesses would be incentivised by a higher limit to get out there and INVEST for the future etc…. One day they will appoint a technocrat as Chancellor and all will be perfecto……
Very good points
made here.
As for Chesterfield, I would have believed that of the last regime, but I thought the new order wanted to create new small businesses? I have a lot of sympathy for those needing to spend hundreds of thousands on a new rig or coach, only to get tax relief when the thing is old and if they've lasted that long!
For years, we had a fairly stable regime of a FYA (I've got another acronym for what the gonks can go & do!) and a 25% WDA. Of course like your wicked Uncle Ernie, chancellors cannot resist 'fiddling around' any more.
In the grand scheme of things, does it actually ACHIEVE anything?
reduction in mainstream CT rate
. .
I do agree about the reduction in mainstream CT rate
– an ideal would be 20% long-term for small companies
– 25% for those up to £1bn. profits
– 30% on the top bit to cane banks and oil companies
.
The reason for doing this is to get the headline rate down for international comparisons and encourage businesses to stay in UK etc.. but it will never happen