Budget 2008: What it means for your small business
Mar 12 2008
Penny Proffit spoke to Paul Webb from tax expert the Robert James Partnership about the effects of Alistair Darling's first Budget on SMEs.
Annual investment allowance (Capital gains tax)
Darling confirmed changes to the capital allowances system. From 1 April for limited companies and 6 April for sole traders, you will be entitled to claim tax relief on the first £50,000 spent on assets.
This means that if you buy new equipment or invest in office space, you can deduct a proportion of the cost of the eligible assets from your taxable profits and reduce your tax bill.
Ross Mackenzie, tax partner at international accountancy firm Mazars, warns that business owners selling their firms imminently have just 24 working days to transfer their firms to either a new limited company or a family trust to take advantage of current rates.
Entrepreneurs’ relief
From 1 April for limited companies and 6 April for sole traders, the first £1 million of gains made on the disposal of all or part of a business or on the disposals of assets following the cessation of a business, will be taxed at an effective rate of ten per cent.
You will be able to make claims for relief on more than one occasion, up to a lifetime total of £1 million of gains qualifying for relief, but gains in excess of £1 million will be charged at the normal 18 per cent rate.
Income shifting legislation
The government announced a delay until 2009 to proposed legislation against income splitting or shifting, the process of divvying up income earned from businesses with a spouse or children in order to make use of their tax allowance and reduce your joint tax bill.
This means that small firms still have an opportunity to structure their remuneration policies in a tax efficient-way.
Corporation tax
While the main corporation tax rate falls from 30 per cent to 28 per cent, the smaller companies rate will actually rise from 20 per cent this year to 22 per cent by 2009.
In response, the Forum of Private Business (FPB) commented that the measures aimed at sweetening this blow were ‘negligible compared to the cumulative tax burden that smaller businesses are facing'.
Small Firms Loan Guarantee
Funds available through the Small Firms Loan Guarantee scheme will be increased by £60 million for the coming year and is due to be extended to include all SMEs.
While the funds available have increased, so has the number of companies eligible to apply for the scheme. Getting banks to agree to take part in the initiative and put up money in the first instance remains no mean feat for very early-stage businesses perceived as high risk.
Women in business
There will be a capital fund of £12.5 million to encourage more female entrepreneurs. ‘This amount may only be a token gesture on Darling’s part,’ says Webb, ‘but it will certainly be welcome.’
The verdict for small business
Paul Webb tax partner at the Robert James Partnership comments: ‘This Budget does little to address the concerns of SMEs. It is pretty dull and leaves small and medium-sized enterprises feeling that the government has turned its back on them. I give it four out of ten for SMEs.’
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Comment by Sally Renshaw
Wednesday 19th March 2008Maybe I am being a bit dim, but why are the government putting £12.5m into helping women get into business and not men? I started my business when I was 25yrs old and have now been going for 5 years.
I employ several members of staff and can honestly say that I have never found that the advice or help available to me is any less than to my male counterparts. In a way I almost find it an insult that the government feel that women need a bit of extra help (poor loves). How about the guys?
They have the same issues and problems to overcome when starting out in business. Again, maybe I am just being a 'silly little woman' and don't understand, could anyone enlighten me?
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