Small businesses the big winners as others are targeted to fund the deficit
Darling gives small businesses a helping hand
In 10 December’s PBR the Chancellor singled out bankers, other high earners and tax avoiders as having the shoulders broad enough to help fund the deficit and recognised the important role small businesses play in the economy.
"The proposed rise of the Small Companies Rate of corporation tax from 21% to 22% is to be deferred until 1 April 2011 (it had been scheduled to rise to 22% on 1 April 2010). This will be of some comfort to the 850,000 small businesses who will continue to pay tax at the lower rate for another twelve months ," said Richard Mannion, national tax director at Smith & Williamson, the accountancy and financial services group.
The Enterprise Finance Guarantee, which is specifically aimed at helping small businesses with annual turnover of less than £25million to gain access to capital, has been extended for a further twelve months, and is anticipated to provide an additional £500m of bank lending to small and medium-sized enterprises. Under the scheme, the Government guarantees 75 per cent of the loan and the other 25 per cent is guaranteed by one of 35 participating banks. It had been due to end in March 2010, but business lobby groups have been campaigning for an extension. Since its launch in January 2009, around 6,850 businesses have been offered nearly £700million in loans.
Darling announced a new 'growth capital fund' which targets growing companies seeking capital of between £2m and £10m to offer lending to credit-starved small and medium-sized firms. The Government is currently in discussions with a group of Global and UK banks who will provide the capital. The Government will make further announcements as to the initial investors and fund structure in the New Year.
Guy Rigby, Head of Entrepreneurs at Smith & Williamson, said: "Any new initiative like the Growth Capital Fund is to be welcomed, but the government and participating banks should ensure that the rules of engagement are both transparent and clear to avoid ‘EFG syndrome’- a condition that induces time wasting and unnecessary administration. "
The ‘time to pay’ initiative (Business Payment Support Service) which has allowed around 160,000 businesses to defer more than £4 billion in tax has been extended for as ‘long as needed’. To date repayments of over £3 billion have been made.
Alistair Darling has also extended the relief on Empty Rates tax for properties. Firms that own empty buildings with a rateable value below £18,000 will not be liable to business tax, a move that will help 850,000 small companies. Darling said that 70% of property owners would therefore continue to be exempt until 2011.
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Disclaimer
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Note to editors
Smith & Williamson is an independent professional and financial services group employing around 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. The group operates from offices in London, Belfast, Birmingham, Bristol, Dublin, Glasgow, Guildford, Salisbury, Southampton, and Worcester.
Smith & Williamson Limited
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International
