What did the budget bring for small and medium sized businesses?
Lewis Smith & Co. take a look at the Chancellor’s Budget statement and see what it means for Black Country businesses.
Introduction
Some things never change. The Budget becomes the main news story for days (increasingly weeks) up until the actual date of the statement. The Chancellor’s performance for those minutes and hours is acutely analysed. Various partisan statements are made by a range of commentators. Then it all seems to go away.
So in the 2012 Budget for all of the talk about helping business was the impact on our main client base: small and medium sized businesses?
In our view the Chancellor made lots of noise in their direction but sadly the reality is that whilst there are some good points he ignored a range of factors that could have made a big difference to the health of individual firms and to the economy as a whole.
First the good news.
Personal Tax. The personal tax allowance will be raised to £9,205 from April 2013.
VAT Threshold. From 1st April 2012, the taxable turnover threshold for VAT registration will be increased from £73,000 to £77,000.
Patent Box. Small software development firms may benefit from the Patent Box which, from April 2013, offers a a corporation tax rate of 10% on profits attributed to patents and similar types of intellectual property.
Tax simplification. Following a review unincorporated companies with sales of up to £77,000 per year will be allowed to change their accounting to a voluntary cash basis instead of normal accrual method. This means you would only have to pay tax on the amount of money actually received rather than on orders that may not have been paid.
The review also suggested that the expenses system for using cars, motorcycles and home facilities should be made easier although no details have been released.
National Loan Guarantee Scheme (NLGS). The NLGS was, strictly speaking, launched the day before the Budget but it ties in with the general aims of the government. It offers businesses with a turnover less than £50 million will be able apply to certain high street banks for loans with a 1% lower interest rate than those outside the scheme. NLGS doesn’t make it easier to get a loan in the first place and normal lending conditions, such as the need for collateral, still apply. Click here for more information on NLGS from the Treasury.
The less good news
The 40% tax band threshold is being reduced to £41,450 which will draw in 300,000 people to a higher rate of tax.
Business rates are still going up by 5.6% in April.
Fuel duty is still going up by 3 pence in August.
Corporation Tax reductions didn’t extend to the small business rate.
VAT on hot takeaway food in shops will reduce sales and cause confusion.
VAT relief on alterations to listed buildings is being withdrawn from 1 October 2012 in a move that will impact both property owners and the building industry.
The introduction of a General Anti-Avoidance Rule is intended to stamp out “morally repugnant” tax evasion. However it is likely to be used by HMRC against schemes that are completely legal mechanisms for avoiding tax.
Conclusions
Clearly the Chancellor didn’t have much room for manoeuvre but it is disappointing to see that the rhetoric about encouraging growth and helping business is not entirely matched by actions.
Some of the Budget decisions are genuinely helpful but they seem designed to support the minimum number of people possible rather than the maximum. We believe that measures such as stopping or even rolling back increases in fuel duty, for instance, would have a much greater positive impact on both business activity and business confidence.
If you need to understand what the specific impact of the Budget is on your business then simply call Lewis Smith & Co. on 01384 235549 or email info@lewissmith.com to arrange a free, confidential discussion with Craig Beale or Andrew Smith.
Lewis Smith & Co. – Planning and advice for business and personal taxation
