Pre-Budget fall-out for small firms

Now that the pre-Budget dust has settled, small businesses everywhere are taking stock of the economic and financial situation. Pending any adjustments in the forthcoming Queen's Speech; Andrew Shaw, partner at Kingston Smith LLP, helps shed some light.

The Good News

-    Corporation Tax:  The 1p increase in corporation tax has been deferred for small businesses until after April 2010.

-    Greater Flexibility:  Businesses will be able to offset £50,000 of this year’s losses against the profits of the past three years for tax purposes. 

This is a temporary measure, applying in the case of companies, to losses incurred in an accounting period which ends between 24 November 2008 and 23 November 2009. In the case of unincorporated businesses it applies to losses for the 2008/09 tax year.

-    Increased Access to Loans:  £1 billion pounds has been made available for lending to small and medium-sized businesses. Through the Small Business Finance Scheme, small firms will be able to borrow sums between £1,000 and £1m on flexible terms.

-    Greater Support: Business in financial trouble will also be able to spread their tax payments.
Businesses are to be given the facility to agree payment schedules for their various tax obligations with a new dedicated Business Support Service.

This will help to ease potential cash flow difficulties. Interest will, of course, be charged on tax paid late.

Whilst the above measures will no doubt be welcomed by small business owners, it is worth being mindful of the following areas which will also have an impact on SMEs in the future..

-    National Insurance: All rates of National Insurance contributions will rise by 0.5% from April 2011.

-    New Tax Rate:  There will be a new 45 per cent tax rate for those earning more than £150,000 a year from April 2011.

Be cautious!

It is worth paying particular attention to the timeframes of the new initiatives when reviewing your business plans. The newly announced measures are all due to start at different times.

Whilst some encouraging initiatives have been announced to help small businesses, it is important for small businesses to cut costs and negotiate hard to enhance their survival prospects for 2009.

Here are Kingston Smith’s top tips for survival over the challenging times ahead:

1. Be realistic about the outlook for your business. Take immediate steps to remove all unnecessary costs. Focus on cash flow requirements over the coming six months and, where possible, engage with suppliers and employees to get their 'buy-in' to your cost-cutting proposals.
 
2. Negotiate hard: cash will be king in 2009. If you can pay by cash then negotiate a discount. No one will want debt on their books in 2009.
 
3. Do not let customers exceed their credit limits. Using tight credit control procedures, make sure that you do everything possible to minimise bad debts - as these will potentially multiply enormously as the credit crunch bites.
 
4. Avoid the Courts: When disputes arise, consider expert determination, arbitration or mediation for cost effective, quick and private commercial dispute resolution. Try to avoid the expense and time involved with court proceedings.
 
5. Hunt for a bargain:  Look out for opportunities to grow through acquisition. There will be some good deals around for who have the resources.

www.kingstonsmith.co.uk

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By LaunchLab.co.uk  on   Dec 01,2008

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Keywords

pre-Budget report    accountancy    taxes    Darling    payment   

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