Taking a closer look at the Budget...
People who run small businesses might be forgiven for thinking that the 2001 Budget had precious little to do with them.
Most of the innovations that touch on small firms do not take effect until the middle of the decade. For example, in press release REV/C&E1 (Further help for small businesses) only two out of the four items highlighted on the first page are set to take effect in 2001.
These are the increase in the VAT registration turnover limit and the raising of the ceiling for cash accounting.
The other two measures – flat-rate annual accounting and, strangely enough, better advice – will be deferred for consultation.
Of course, ACCA believes that there should be full and open consultation on all aspects of tax, but we are concerned that the government seems incapable of creating clear and uncomplex legislation afterwards.
It seems that the government actually recognises this. Hence ministers act as though they are walking on eggshells and do not intend laying out any new legislation which might prove to be the sequel to IR35 or double tax relief prior to the next general election.
New social measures in the Budget that caught the eye include the extension of the maternity leave period and the introduction of government-funded paternity leave.
Socially, these are wholly desirable, but administratively they create massive burdens for small companies.
The Budget also contained the usual repetition of measures that already exist, including 100% first-year allowances.
But muttered almost casually by the chancellor is a potentially very praiseworthy measure; there is to be consultation on a ‘tax incentive for community investment’.
If they are handled pragmatically, the proposals in the 30-page document accompanying the announcement could potentially provide a big boost to small businesses in socially excluded areas.
Many years ago, ACCA proposed the focusing of help on such communities through the vehicle of a community fund in a system of self help.
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So we hope that this new government-backed measure will take help much deeper into those stagnant and declining areas of our economy.
- Chas Roy Chowdhury is head of tax at the Association of Chartered Certified Accountants.