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Whilst the FPB has welcomed the increased funding, which will be made available to smaller firms, increases in taxation will add to the burden of running a business and the rise in corporation tax, one of the main costs to small businesses, has been frozen but not reduced. Further, a reduction in VAT could be an administrative nightmare, so read on to find out about the changes you will need to make.
Reduction in VAT
VAT will be temporarily reduced to 15%, from 1 December 2008 to 31 December 2009. This will affect all businesses which are VAT registered. Zero-rated and reduced-rated supplies will not be affected. This is going to be complicated for businesses to administer and we recommend that you read through this guidance from HMRC and then call our member helpline on 0845 130 1722 if you have any queries.
Funding for smaller firms
The high street banks have applied for a £1bn funding pool, which will be made available to smaller firms. In addition, a temporary Small Business Finance Scheme of £1bn has also been announced, the details of which will be released in early 2009. Funding to the value of £1bn will also be made available for companies which export. We have been campaigning extensively for additional funding for small firms and have met with Prime Minister Gordon Brown, Alistair Darling as well as the banks and we welcome these announcements. Again, the Government has not yet announced the details of how businesses can access this finance. We will update members as soon as we know more.
Corporation tax
The planned increase in corporation tax is being deferred for one year and therefore the lower end of corporation tax will remain at 21% until 2010. We have been campaigning for a reduction in corporation tax and would have liked the Government to have gone further, but the freeze is better than nothing.
Taxation holiday
Businesses experiencing temporary financial difficulties and needing more time to pay outstanding tax bills, or bills due soon, will be offered temporary relief. Businesses will be able to defer tax payments including corporation tax, VAT, PAYE, income tax and National Insurance Contributions. We have been communicating members' experiences of the downturn to the Government and are pleased that HMRC will be flexible with businesses which are struggling. HMRC has set up a Business Payment Support Service, which is already up and running. If you are struggling to meet your tax obligations, follow this link to find out more about the new service.
Taxation on petrol
There will be an increase of 2p a litre on fuel duty from 1 December. Duty on alcohol and tobacco will also increase. The increase in fuel duty was delayed last year following campaigning by the FPB; however, following the recent reduction in fuel prices, Mr Darling has decided that an increase in duty will fund some of his other tax cuts.
Empty Property Rate Relief
There will be a temporary increase in the number of businesses which are eligible for Empty Property Rate Relief. Empty properties with a rateable value of under £15,000 will be exempt from business rates. We have been campaigning for the Government to reinstate Empty Property Rate Relief and welcome this temporary reprieve. The Government has, however, stated that, in the long term, it believes it is right to charge rates, even when properties stand empty.
National Insurance Contributions
There will be an increase in National Insurance contributions of 0.5% from April 2011.
If you have queries about how these changes will affect your business, please call the FPB's member helpline on 0845 130 1722.
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