TaxPersonal TaxBudget 98 – Small businesses promised big gains

Budget 98 - Small businesses promised big gains

Federation of Small Businesses welcomes corporation tax payment changes and National Insurance reforms but larger employers are more cautious.

Small employers were told they would be supported when they started aes and National Insurance reforms but larger employers are more cautious. business, when they invested and when they took on staff in the Chancellor’s Budget speech this week.

Gordon Brown also told medium-sized employers they would be allowed to join small companies on the list of organisations that would be exempt from paying corporation tax by instalments.

Stephen Alambritis of the Federation of Small Businesses said: ‘We can’t see any pain in this Budget, only gain.’

Bruce Epsley, chairman of CIMA’s finance committee, agreed the Budget will give a boost to small enterprises.

He said: ‘Agreeing medium-sized companies would not need to pay their corporation tax by instalments will be a tremendous boost to cash flows.

And making the thresholds for income tax and National Insurance contributions the same at #81 per week will also give smaller companies a boost, along with the decision to set capital allowances for small businesses at 40% for the first year from July 1998.’

Brown also offered venture capitalists a boost, saying the ailing Enterprise Investment Scheme would merge with the capital gains re-investment relief.

The new vehicle will take advantage of a 50% rise in reliefs to #150,000.

Larger employers welcomed the cut in corporation tax to 30%, which the Chancellor flagged in last year’s July Budget. But Christopher Pearce, finance director of Rentokil Initial and chairman of the 100 Group of FDs, was concerned that Brown had stuck to his decision to calculate corporation tax based on an estimate of future profits.

‘There are problems for publicly listed companies when they forecast earnings,’ he said, envisaging difficulties with brokers and analysts who are ever watchful of predictions of company profits.

Neil Chisman, FD of hotel group Stakis, said the Chancellor had eased the burden on business slightly, ‘but it’s a “steady as she goes” Budget’.

‘He doesn’t have much room for manoeuvre because everything is being driven by entry to the EMU,’ he added.

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