While we are not going to pre-judge how long this Budget will be the Budget,
we have to start with the health warning that long-term plans based on the
chancellor’s statement may only survive in the short term.
As for now and for SME finance directors, well, good news all round
apparently. Central government is targeting to increase it’s spending with SMEs
by 15%, or £3bn at current spending levels, and pay 80% of their bills in five
days. This could increase to £15bn if adopted across the whole of the public
Banks are going to be told to lend to SMEs, again, and a new oversight body
will be created to ensure that credit decisions are fair, with the power to
enforce their decisions.
The new Capital Growth Fund, supported by Lloyds, RBS, Santander and
Clydesdale/National Australia Bank, will be raring to invest in growth and the
Annual Investment Allowance has been doubled to £100,000. All this and
corporation tax has been held at the current rates and the trading loss carry
back of three years up to £50,000 continues for accounting periods ending
between 24 November 2008 and 23 November 2010.
Even the previously announced fuel duty increase will see its implementation
phased in over the next ten months rather than in one go – although with oil
prices still high, this is going to prove a burden on almost every businesses’
For your entrepreneurial shareholders it just gets better with all these
extra profits from public sector works, growth from investment funding and more
tax allowable expenditure enabling them to take advantage of the effective 10%
rate of capital gains tax on their entrepreneurial activities up to the first
£2m of their lifetime gains, doubled from the current £1m this year, and the
main rate held at 18% after this. As long as they purchase their new dream
property before next April they will also avoid the 5% stamp duty band on
property over £1,000,000.
As always, the devil is in the detail and the wording. Along with the extra
allowances come extra anti-avoidance rules, particularly around the Annual
Investment Allowance and Employee Benefit Trusts. Both of these should be
reviewed to ensure that what worked last year will again this time. The first
real test will come, however, in the attempts to improve funding for SMEs.
What has been promised in the past has not materialised for the vast majority
and it is easy to be sceptical of it happening now. With increased capital
requirements and potential further taxes for the banking sector, their ability
to lend will be diminished regardless of their and the government’s desire.
Much will rest on the new Small Business Credit Adjudicator and the remit it
will have to work within. Only time will tell, and we can but hope that it
proves sufficient for the SMEs that are vital to our economy as a whole.
The second will be pushing through change in public sector procurement,
something that has proved a struggle in the past.
We hope this will prove, alongside a recovering economy, a much needed boost
for the SME sector, but, we shall have to wait and
see whether this is really the case or if 23 March simply provided a nice
photograph for the Darling family album.
Richard Simpson is chief operating officer at FD Solutions
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