Emergency Budget Plans “mostly positive for small firms”
Cuts in corporation tax, partly scrapping increases on employers’ National Insurance Contributions (NICs), and a new small firms’ loan guarantee scheme are among the changes that business groups expect in the new Government’s emergency Budget on 22 June.
Association of Chartered Certified Accountants (ACCA) head of taxation, Chas Roy-Chowdhury, said that the emergency Budget was likely to be mostly good news for small firms.
“It will be more of a fiscal Budget, in which public spending cuts will be the focus. Many of the support measures introduced under the Labour Government for small firms will stay, such as the Time To Pay Scheme, and most of the tax rises will hit individuals harder than small businesses.”
“The announcement of employers’ NICs rises being partly scrapped next year is positive for employers and there may also be an increase in capital allowances. There may well be a VAT rate increase announced, to 20%, and businesses may have to prepare for that now as it could be implemented in July.
“The small business rate of corporation tax is likely to be maintained at its current level, and the main rate reduced from 28% to 25%. The increase in Capital Gains Tax for non-business assets to 40% will not affect most small businesses, but it could still affect some, as non-business assets can include properties, including Bed & Breakfasts.”
Prior to the Budget, new Chancellor George Osborne is due to set out plans for an initial £6 billion of public spending cuts to be made during this financial year. A long-term plan for further spending cuts will be revealed in the Budget.
British Chambers of Commerce (BCC) spokesman, Sam Turvey said:
“It is realistic to expect that 80% of the deficit-reduction measures announced in the emergency Budget will be spending cuts and 20% will be tax rises.”
“Reducing the corporation tax rate would make UK businesses more competitive across Europe. However, to regain the money they may cut out some of the tax allowances and reliefs that benefit small firms.”
In their manifesto, the Conservatives also promised to create more diverse sources of funding for small firms, including a National Loan Guarantee Scheme.
“This scheme, a version of the previous Government’s Enterprise Finance Guarantee Scheme, is likely to be announced in the Budget. It may just be an extension of the current scheme, which was a recession measure, but it is potentially good for small firms that are struggling to get lending.”
The new Chancellor has also announced plans to abolish NICs for employers on the first ten jobs they create.
HM Treasury was unable to comment on what the Budget may contain.
For more information about the coalition’s programme for government, visit the HM Government website www.hmg.gov.uk