IMPACT ON BUSINESSES

“Small and medium firms are the engine of our economy," said the Chancellor as he announced plans to improve access to credit, ease cash flow and reduce burdens for businesses.

• New Business Payment Support Service provides potential stress-relief for businesses concerned about paying Corporation Tax, VAT, PAYE and National Insurance liabilities. By offering the opportunity to reach agreement with HMRC for payment to take place over longer periods in line with an agreed timetable, a significant cash flow burden may be relieved. Late payment surcharges can be avoided, as long as the timetable is adhered to, although be aware that interest may still apply.
• A potential cash flow boost to businesses is offered by the extension to the period that trading losses can be carried back for. Currently, this is generally only one year, but for companies this will be extended to 3 years for losses in accounting periods ending between 24 November 2008 and 23 November 2009, and for unincorporated businesses making losses in the 2008/09 tax year. Additional tax repayments in relation to earlier years may therefore be available.

However, HMRC has set a maximum of £50,000 on losses that can be carried   back beyond the most recent prior year. This will cap additional repayments over and above those currently available at a maximum of £15,000.

And be aware – HMRC will not make any repayments arising under these new rules until after Budget Day 2009.

Measures announced in principle but with few details available include:

• Introduction of Small Business Finance Scheme to make loans up to £1m more accessible and affordable.
• Temporary facility to be offered under the Export Credit Guarantee Scheme from January 2009 to help small exporters with working capital requirements.

Other business-related matters emerging are:

• Future reform of taxation of foreign corporate profits in Finance Bill 2009, including exemption from UK corporation tax on most foreign dividends. Not so positive is the introduction of a worldwide debt cap, which may affect the deductibility of interest charges for UK companies with loans from overseas parents.
• Income shifting rules are postponed (again), to April 2010.
• Switch to emissions-based taxation of business cars confirmed.

“These are exceptional times that require exceptional measures,” Mr Darling said.  In keeping with this sentiment, HMRC has stated that, in respect of the availability of payment flexibility under the Business Payment Support Service “in most cases we should be able to give you a decision in about 10 minutes.” That would be exceptional indeed.

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