Business the Main Beneficiary as Darling Bids to Stave Off Disaster
The Chancellor of the Exchequer’s announcement that the standard rate of VAT would be reduced from 17.5 per cent to 15 per cent was possibly the most widely leaked Government decision in recent years and will come as welcome news to the poorest in the economy, for whom VAT creates a disproportionate impact on their spending power. The VAT change applies from 1 December 2008 until the end of 2009, so whether it will be welcomed by businesses, which will have the task of reprogramming computer systems, tills and so on twice in 13 months, remains to be seen.
However, there are changes that businesses are bound to welcome. The proposed increase in Corporation Tax, scheduled for next April, has been postponed. There are new measures to provide support for borrowing for businesses that export and the Small Business Finance Scheme is being revamped to make more funds available to the smaller business. The system for use of tax losses is being revised to be of greater benefit to loss-making companies, by allowing carry-back of losses of up to £50,000 to be extended from one to three years. A new HM Revenue and Customs Business Payment Support Service is being established in order to allow businesses in temporary financial difficulty to pay their tax bills to a timetable they can afford.
Most welcome of all is the decision to postpone the massively unpopular ‘empty property rates’ charge where the property concerned has a rateable value of less than £15,000 – which, it is claimed, will exempt 70 per cent of vacant buildings in the UK.
In addition, businesses will benefit directly from the decision to bring forward £3 billion of capital expenditure from 2010/2011.
All will not be plain sailing, however, as the Treasury (which is traditionally optimistic in its forecasts) is expecting the economy to shrink next year, despite the fiscal boost, before economic growth resumes in 2010 or 2011.
The downside is in the longer term, with plans for increased taxes and reduced personal allowances for high earners (the highest earners will receive no personal allowance at all) and higher National Insurance Contributions scheduled for future years.