Tax & Accounting News

Small Businesses Boosted by the Budget

13/03/2008

North London based accountancy firm Harris Lipman is encouraging small business owners to pay close attention to this year’s budget, as a large proportion of the changes are pertinent to them.

In his speech, Chancellor Alistair Darling announced proposals to make compliance with legislation easier for small and medium sized enterprises, including a £12.5m contribution to a capital fund for women entrepreneurs. 

The abolition of taper relief and indexation relief and the introduction of a flat rate Capital Gains Tax of 18% that was announced in the pre budget report in December 2007 were met with the widespread opinion that SMEs would be the hardest hit. In response, Mr Darling announced the proposed Entrepreneur’s Relief; a lifetime allowance of £1million to be taxed at the lower 10% rate. In the budget , he confirmed that these plans would go ahead from 5 April 2008. The individual annual Capital Gains Tax exemption for 2008/09 has been increased to £9,600.

He also announced further measures beneficial to businesses, including a temporary increase of 20% in the amount of finance available through the Small Firms Loan Guarantee Scheme and a relaxation of the restriction on the age of the business, which at present has to be more than five years old.   

Mr Darling announced that measures will be announced in the 2008 pre budget report to reduce the difficulties SMEs face when competing for public sector contracts.  An independent review will take place, with a target that SMEs will be able to win 30% of all public sector contracts in the next five years.

Family owned businesses have been given a temporary reprieve from the Chancellor’s planned Family Business Tax (“income shifting”), which he announced in the Pre Budget Report in December 2007, will now be delayed until 2009 to allow time for further consultation.

Barry Lewis comments: “SMEs looked set to suffer from many of the changes in this year’s budget, especially in terms of Capital Gains Tax, but the Treasury's introduction of some new initiatives to encourage entrepreneurship and enterprise is actually a positive move for the sector.”

For more information, contact Harris Lipman on 020 8446 9000.

 

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