BUDGET IN DEPTH: Mixed news for small businesses
Despite the raft of measures brought in by the Chancellor to help small businesses, the increase in employers' national insurance contributions could prove costly for growing companies.
In his Budget statement, Gordon Brown announced a one per cent hike in NIC payments for employers up to 12.9%.
Pat Billingham, Ernst & Young?s entrepreneurial services tax partner, said: ‘I’m sorry to see that he’s decided to tax jobs with the 1% levy when the recovery is still so fragile.’
But with this exception, the other measurers brought in by the Budget were welcomed as good news for Britain’s army of small businesses.
Brown moved to make starting up a business more attractive by cutting the corporation tax starting rate from 10% to zero. – companies making £10,000 or less in profit will not have to pay any corporation tax.
At the same time, the tax rate for small businesses – those making between £10,000 and £50,000 will now pay 19% corporation tax.
Small businesses would also be able to benefit from from an optional flat rate VAT scheme, which will allow 500,000 small firms to cut their compliance costs – the changes mean that businesses with a taxable turnover of up to £100,000 will no longer need to keep individual VAT records.
A further change to the VAT regime will allow small businesses to file only one annual return as soon as they are registered for VAT instead of the current requirement of four returns for their first year.
Other measurers were also welcomed: according to Alastair Kendrick, tax director at E&Y, the stamp duty exemption for transfers of goodwill ‘will encourage more people to buy into businesses’.
The move will reduce the tax bill on transfers of businesses putting goodwill on the same footing as intellectual property.