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SME rescue package 'too little, too late'

25 November 2008
Categories: News , PBR 2008 , Pre-Budget Report 2008 , Companies
'Benefits risk being diluted by detail'

The Pre-Budget Report's £7 billion package of measures aimed at helping small and medium-sized companies (SMEs) has disappointed many within the tax community.


The head of corporate tax at accountancy group Vantis, Terry Baldwin, said that 'the potential benefits risk being diluted by the detail'.


He added: 'Businesses may not benefit by as much as they first think, once they have balanced all the measures against one another.


'The aim of easing the tax burden on SMEs could be partially achieved, but it may not prove to be on a large enough scale to provide the much-needed stimulus.'


Mr Baldwin warned that the deferment of the 1p rise in corporation tax 'won't be felt in cash flow terms until 2010 at the earliest', and he remarked that 'the headline-grabbing reduction in the main rate of VAT could turn out to actually leave businesses out of pocket.'


Stephen Quest, corporate tax partner at Grant Thornton, claimed that the Chancellor's aid package for small and medium-sized firms came 'at a time when many business owners have no other viable option'.


He said that 'Alistair Darling had no choice but to provide SMEs with some tax giveaways. Unfortunately, for many the help is too little too late and may not prevent banks from enforcing debt obligations in a dismal market'.


BDO Stoy Hayward welcomed the freezing of the CT rise, but tax partner Stephen Herring said the Chancellor 'will not have forgotten his... original motive in proposing the increase, which was to tackle perceived tax avoidance by personal service companies.


'I suspect the Chancellor's retreat on this measure will not be matched by HMRC accepting that [such avoidance is] now acceptable.'


Mr Herring went on to say that the £50k carry-back of tax losses for three years, announced in the PBR, 'is a useful measure that will bring much needed relief to small businesses, but it is a shame that it is not a permanent change'.

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