Pre budget report measures affecting small businesses

Last Updated: 22 Dec 2008

At the end of November, the Chancellor of the Exchequer published his much awaited Pre Budget Report. One of the most advertised measures contained in it was the reduction of VAT from 17.5% to 15% which took place on 1 December until the end of 2009.

This was ostensibly designed to boost consumers’ demand but has also an impact on businesses, if only because of the adjustments needed be made to implement the change.

The Report however contained several other measures that will impact small businesses. A selection of those most relevant to accommodation providers are as follows.

• A Small Business Finance Scheme will support £1bn of bank lending to SMEs and will be delivered by RDAs and Business Links from early 2009.
• £25m will be given to RDAs to support small businesses in addition to £50m to provide equity and quasi-equity to over-leveraged SMEs.
• A new Business Payment Support Service will give businesses a fast and streamlined service for arranging to pay their HM Revenue and Customs (HMRC) tax bill to a timetable they can afford. In addition to this, HMRC will offer further practical help by not imposing additional penalties or surcharges on the tax within a time to pay arrangement.
• Corporate tax for small businesses which was due to go up to 22% has now been frozen to 21% as of April 2009. SMEs making a loss will also receive more generous tax relief. Carry-back of losses up to £50,000 has also been extended temporarily from one to three years.
• The introduction of a “income shifting” restrictions whereby it would become more difficult for a minority of individuals to benefit financially from shifting part of their income to someone else who is subject to a lower rate of tax, has been postponed, though the issue will remain under review.
• Rates relief changes on empty property have also been reversed. Empty properties with a rateable value of less than £15,000 will be exempt from business rates for the next financial year.

Direct.gov.uk provides further information on the 2008 Pre Budget Report.