Pre Budget Report 2008 – Will It Save UK Business and What Do The Changes Mean For You?
Typically, the pre-budget report is a sign of bigger things to come. Chancellors have traditionally taken the autumn statement as an opportunity to test the waters on various fiscal policies such as taxation cuts and rises.
But this year has been anything but typical. Small businesses have spent 2008 fighting off inflation on one front, and looming recession on the other.
Analysts have speculated for weeks that Prime Minister Gordon Brown and Chancellor Alistair Darling would use their address to the Commons to introduce a raft of fiscal measures to reinvigorate the UK's lifeless economy.
They were right. Aside from the reduction in the rate of VAT from 17.5 per cent to 15 per cent for a 13-month 'holiday', Mr. Darling unveiled a number of changes intended to affect the small business community.
Among them was the decision to postpone a proposed increase in corporate taxation, which would have seen rates rise from 21 per cent to 22 per cent. This move was warmly received by the Federation of Small Businesses (FSB), which believed it underlined the government's determination to steer small businesses through the economic crisis.
The FSB's national chairman of policy, John Walker, commented: "The pre-budget report is a sign of the importance of small businesses to the UK economy. Measures…such as giving businesses longer time to pay bills and offsetting losses, will give small businesses a welcome breather from the taxman."
Taxation reprieve was not the only element of the pre-budget report that came in for strong praise from the FSB, with the group also highlighting Mr Darling's announcement of the Small Business Finance Scheme.
Echoing the FSB's own demands in October for a business start-up rescue package, the scheme will make approximately £1 billion in cash available to small firms in emergency loans.
The pre-budget report also saw the introduction of the HM Revenue and Customs Business Payment Support Service, which is intended to allow small firms in financial difficulty to shift their taxation bills to a timetable suited to their needs. While this measure was generally received warmly, others were not, such as the proposal to raise national insurance contributions by 0.5 per cent in 2011.
David Frost, director general of the British Chambers of Commerce, said: "At the very time when the economy should be coming out of the recession, businesses will face an extra tax on employing people."
The same organisation also expressed doubts over Mr Darling's decision to scale back corporate taxation on disused commercial properties to just those with a rateable value of £15,000 or over.
Mr Frost added: "Businesses will wonder why he didn't just restore empty property rate relief in full, instead of only raising the threshold for a year."
Similarly, the Forum of Private Business voiced disappointment over the government's fiscal defence strategy, pointing out that the majority of promises made by Mr. Darling expired in 2011.
The group's chief executive, Phil Orford, commented: "In addition to short-term liquidity solutions, we were hoping for medium and long-term policies to provide more certainty for business owners."
Only time will provide reassurance (or confirmation) to those sceptical over this year's pre-budget report, which was no doubt the most nervously anticipated for many years.
But perhaps the most stinging criticism landed on Mr. Darling following the report was by his rival in the opposing dug-out, shadow chancellor George Osborne, who highlighted that many of the new measures - such as the new income taxation band - did not come into effect until after the next general election in 2011.
The pre-budget report will have impacted on your business already and if you feel you are not being kept up to date by your accountant then please call 0800 0523 555 to be put in contact with your local TaxAssist Accountant or complete our contact form.
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