178 – The good and the bad for small businesses

I received this from a friend of mine, Tim Rosser, who runs a turnaround practice. It’s called Turning Circle Solutions. I thought it worth sharing with you – Tim makes some interesting observations which are useful for all small businesses.

Tim blogs: The budget speech was, as always, very political. We have all our own ideas as to what’s fair or not.

But I thought it would be useful to remind you of a few nuggets of information that were imparted plus additional developments relevant to business owners and the self-employed. Plus some brief commentary.

Statutory redundancy payments increase. Maximum increased from £350 to £380 per week.


Comment: of course this offers some comfort to those who unfortunately lose their jobs, but is a significant additional burden for an employer. Increases the possibility that younger workers with fewer years of service to their company will be selected for redundancy. TUC had asked for the limit to be raised to £500 per week.

Capital allowances – tax relief on qualifying assets increased from 20% to 40% for one year.


Comment: so if you want to invest in that new bit of capital equipment or computer for your business there’s a little more incentive to do so.

Further extension of help by another year until November 2010. It allows loss making businesses to reclaim taxes on profits made in last three years by carrying back losses made now.


Comment: the limit is £50,000. A sensible extension. Some help for small businesses here.

Higher income tax and national insurance rates come in from April 2010.


Comment: Owners of business should therefore consider bringing forward dividend payments if they are high earners to avoid 10% tax increase. If you are self-employed, also think about incorporating your business to benefit from widening gap between corporation tax and higher income tax.

Taxman powers 1: Britons who fail to report their full earnings will be named and shamed in public by HMRC. In addition HMRC will demand up to five years further records from UK taxpayers who are penalised for deliberately understating their tax bill by more than £5000.


Comment: note, name and shame only applies to taxpayers avoiding £25,000 or more.

Taxman powers 2: Not really a budget imposition. But please note that effective from April 01 the taxman now has increased powers to visit taxpayers at business premises on an unannounced basis. This has led to some ‘big brother’ scare stories in the media.


Comment: whatever actually transpires in practice, it is undoubtedly true that the taxman’s powers vis-a-vis the tax payer have definitely strengthened. The government has now to collect all the loose change it can from the bottom of the national sofa, as the economic position is so parlous. So this extension of powers is not really surprising. Unfortunately. In my personal opinion, the relationship between the taxman, the businessman and their advisers has improved significantly over the last five years or so. This extension of powers may not help much.

Talking of ’name and shame’, wouldn’t it have been great if the Chancellor had introduced tougher legislation to name and shame and fine large businesses that fail to pay their debts on time to smaller suppliers? Remember, 25% of businesses fail currently because their customers don’t pay promptly!

Tim Rosser, managing director, Turning Circle Solutions
Budget comment blog from Turning Circle Solutions