But reports this month suggest fewer than 10,000 businesses have benefited from the initiative.

Speaking to the Press Association, a Treasury spokesman said:

“Over 10,000 businesses have already been helped by the scheme, with these employers benefiting by an estimated £6m. But more businesses could benefit and HMRC has been working to increase this number.”

Are you missing out? Speak to your accountant today, or call us on 01327 811164 to make sure you’re making the most of the scheme.

The British Chamber of Commerce (BCC) has revealed today (15 February) that small firms in the UK believe that the planned National Insurance increase should be scrapped and replaced by a less damaging alternative.

In the BCC’s latest Monthly Business Survey, companies were asked what they thought were the Government’s most pressing issues. A considerable 41% answered that reducing the budget deficit should be the number one priority, while 22% believed that cutting legislative burden was most important.

When asked about the measures that the Government could take to reduce public debt, 36% said that they felt VAT would be the least damaging option for their business, compared to the 6% that voted in favour of National Insurance rises.

With National Insurance increases scheduled for April 2011, and with the next general election fast approaching, the BCC’s latest findings come at an interesting time for British politicians. David Frost, Director General of the BCC, commented:

“The message from business is clear. After an election, we have to get a serious grip on the country’s public finances and escalating debt. Cutting the deficit means making tough decisions on spending, like freezing the public sector wage bill and reforming public sector pensions.

“Raising a damaging tax on business, like NICs, will be counter-productive. It will mean fewer jobs and less tax revenue in the long-term. While businesses fully understand the need to bring down the UK’s deficit, they are clearly saying that using VAT would be a less damaging way to achieve this.”

Government forecasts indicate that raising VAT by 1% would create an extra £4.5 billion, while a 1% National Insurance increase would provide £5.1 billion.

The good news is the freezing of the corporation and income tax rates, although personal allowances are also frozen at the 2009/10 levels. The promised 50% rate of income tax will be introduced for income over £150,000 and there are further anti-avoidance rules to prevent those high earners from gaining top level tax relief on pension contributions.

The bad news will come from April 2011 when NI rates are set to surge upwards. Corporation tax may also increase in this month. Businesses with empty commercial properties may qualify for an exemption from business rates but only until 31 March 2011. Tax incentives are introduced to encourage you to buy electric cars and vans, but just how many milk-floats do you need?

Pre-Budget December 2009

Corporation Tax

Corporation tax for companies with ‘small’ profits was set to rise on 1 April 2010 to 22%, a rise originally planned to apply from 1 April 2009. However, the Chancellor has decided to postpone this increase for a second time. The corporate tax rate for companies with ‘small’ profits will now remain at 21% until at least 1 April 2011.

‘Small’ profits are those that fall below the single company threshold of £300,000. Companies with profits of £1.5 million or more pay corporation tax at 28%. Profits that fall in the range £300,000 to £1.5 million are taxed at a marginal rate of 29.75%

These profit thresholds are proportionately reduced by the total number of companies associated with the main company. An associated company is any company that is under the common control of an individual, group of related individuals or another company. Thus if you control two companies those companies are associated and only the first £150,000 (£300,000/2) of the annual profits of each company will be taxed at 21%.

Currently any companies controlled by your spouse or civil partner are also associated with your own company, even if your spouse’s company has no commercial links to your own company. This associated rule is under review by the Taxman so it may be relaxed from April 2010 where the companies have no commercial links.

VAT

As previously announced the standard rate of VAT will increase from 15% to 17.5% on 1 January 2010. The Chancellor emphasised that he has no plans to make further changes to VAT, so we can be fairly certain that the VAT rates will remain as they are, at least until after the election.

The Taxman is aware that some businesses, particularly entertainment venues and pubs, will be trading at midnight on 31 December 2009 when the standard rate of VAT changes. By concession those businesses can treat their standard rated sales made before they close before 6am on 1 January as chargeable to VAT at the 15% rate. This concession does not apply to online retailers or to catalogue companies.

If your business is registered to use the flat rate scheme for small businesses, the flat rate used to determine how much VAT to pay to the Taxman will also change with effect from 1 January 2010. The new flat rates for each business sector are found in the Pre Budget Report Press Notice no. 33 on the HMRC website at http://www.hmrc.gov.uk/pbr2009/pbrn33.htm

Most, but not all, of these flat rates have reverted to the rates that applied before 1 December 2008. However, some rates have been increased by a greater amount to reduce the gain some businesses make by using the flat rate scheme. You may find that the new flat rate for your business sector does not produce the savings for your business as it did previously. If so you can leave the flat rate scheme at any time. We can help you calculate whether it is beneficial for you to stay in the flat rate scheme or not.

National Insurance

There is no immediate change in the main rates of class 1 employers and employees NI from 6 April 2010. From 6 April 2011 a 0.5 per cent rise was planned but this has been increased to 1% for most rates of NI as shown below.

• Employer’s class 1 above primary threshold 2009/10 – 12.8% : 2011/12 – 13.8%
• Employer’s class 1A and 1B 2009/10 – 12.8% : 2011/12 – 13.8%
• Employee’s class 1 below up earnings threshold 2009/10 – 11% : 2011/12 – 12%
• Employee’s class 1 above upper earnings threshold 2009/10 – 1% : 2011/12 – 2%
• Self-employed class 4 between lower and upper profits thresholds 2009/10 – 8%: 2011/12 – 9%

There is also likely to be increases in the reduced rates of NI for contracted out contributions for both employers and employees, but those rates have not been confirmed as yet.

This increase in NI rates is double the increase announced in the 2008 Pre Budget Report. It amounts to a 7.8% rise in NI costs for employers in respect of the wages of every person employed. Employees will also suffer a 9% to 10% increase in NI charges, and the self-employed will be paying at least 12.5% more in NICs in 2011/12.

There will be an increase in the point at which individuals start to pay NI, meaning that people with an income below £20,000 will be protected from this change.

These NIC increases will bring in a significant amount of additional revenue for the Government from April 2011.

Property

Business Rates

From 1 April 2008 most vacant business properties became liable to business rates, when previously such properties were exempt from rates. In last year’s Pre Budget report the Chancellor announced an exemption from business rates for empty properties which had a rateable value of less than £15,000, but only for the 2009/10 financial year.

This exemption is now to be extended for the year to 31 March 2011, and expanded to cover empty properties with a rateable value of less than £18,000. The higher threshold reflects the increase in rateable values following the business rates revaluation that comes into effect from 1 April 2010.

Furnished Holiday Lettings

The favourable tax concessions for the commercial letting of furnished holiday lets will be removed with effect from 6 April 2010 for unincorporated businesses and from 1 April 2010 for companies. Hoteliers and bed and breakfast proprietors are not affected by these changes.

• Losses – future profits and losses from furnished holiday lettings will be treated as income from a property business, and thus relief for losses will be available only against the property lettings business. Any current losses from the furnished holiday lettings, which have not been used before April 2010, will be carried forward to be set against the future property lettings business.
• Pensionable income – from 6 April 2010 income from a furnished holiday lettings business will not count as pensionable income, which may reduce the amount of pension contributions available for tax relief in any tax year.
• CGT – the capital gains reliefs associated with disposing of a property used in a commercial furnished holiday letting business will cease to apply for disposals made after 5 April 2010.

Stamp Duty

A stamp duty ‘holiday’ was announced for residential property in September 2008, which effectively raised the lower threshold property values where SDLT is imposed at 1%, from £125,000 to £175,000. This lower threshold will revert to £125,000 on 1 January 2010. Where the residential property is located in a disadvantaged area the threshold from which the 1% rate of SDLT is imposed is £150,000.

SDLT is normally imposed at the completion date for the property sale, not the date on which contracts are exchanged. If the buyer takes possession of the property before the completion date, SDLT is charged on that earlier date. To take advantage of the zero rate of SDLT on a property costing no more than £175,000 you need to complete or take possession of the property before 1 January 2010.

CGT on Homes

Some commentators expected the rules that exempt one’s ‘main home’ from capital gains tax on sale would be tightened up. This has not happened. Instead there is a relaxation of the rules where part of the home is occupied exclusively by an adult in care, and the owner of the property is paid to care for that adult. In such cases the whole of the property will qualify for exemption from capital gains tax.

Individuals

Income Tax

All the income tax rates and thresholds will be frozen from 6 April 2010, with the exception of the 50% rate of income tax that will apply on income above £150,000.

2010/11 Income Tax Rates

• Savings rate (on savings income only) 10% for £0 – £2,440
• Basic rate 20% for £0 – £37,400
• Higher rate 40% for £37,401 to £150,000
• Additional rate 50% for over £150,000

All personal allowances have also been frozen at the 2009/10 rates for 2010/11 as follows:

Personal allowances: 2010/11

• Under 65 – £6,475
• 65-74- £9,490
• 75 and over – £9,640
• Minimum marriage allowance* – £2,670
• Marriage allowance born before 6 /4/1935* – £6,965
• Blind persons allowance – £1,890
• Income limit for age allowances – £22,900

* given at 10% rate only

Tax Relief for Pensions

Some incredibly complex rules were brought in from 22 April 2009 to discourage those with incomes above £150,000 from piling money into their pension schemes. This was because tax relief on pension contributions will be reduced for these high earners from 6 April 2011.

Many people with earnings around the £150,000 mark thought up cunning plans to reduce their taxable income to just below £150,000, so they wouldn’t be caught by the restrictions on tax relief for pensions. In response to this planning the Government has changed the rules, by stating that anyone with income above £130,000 will be caught by the pension relief restrictions with immediate effect.

Inheritance Tax

Although the value of an estate that is exempt from inheritance tax was set at £350,000 with effect from 6 April 2010, this exempt threshold is to be frozen at the current level of £325,000. The justification for this freeze is that property prices have not increased over the last year.

Company Cars and Vans

Electric cars are cool! Or so the Government would like us to believe. From 6 April 2010 if you provide your employee with an electric car or van for their own use, it will be a tax free benefit. What’s more when your company buys a new electric van from 1 April 2010 it will be able to write-off the full cost for tax purposes in the year of acquisition. This tax treatment already applies to all new low emission and electric cars. These new tax incentives only apply to fully electric vehicles, hybrids don’t count.

The taxable benefit charged for the use of ordinary company cars and vans, and fuel for those vehicles, is set to increase from 6 April 2010. For example the driver of a car with CO2 emissions of 160g/km is currently taxed at 20% of the vehicle’s list price. From 6 April 2010 the driver of the same car will be taxed at 21% of its list price. Currently the fuel benefit for that vehicle is based on a fixed value of £16,900, From 6 April 2010 this value will increase to £18,000. Hence the taxable benefit of having free fuel for the car will increase from £3,380 to £3,780.

The taxable benefit charged when fuel is provided for private use in a company van will increase from 6 April 2010 from £500 per year to £550 per year.

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Raising taxes for small businesses would ultimately cost the UK billions of pounds and hundreds of thousands of jobs, according to a new independent report for the Federation of Small Businesses (FSB). The report, by the Centre for Economics and Business Research (CEBR), argues that increasing the burden of taxation on the country’s small businesses – which make up 99 per cent of all UK businesses – would plunge the economy further into debt and take its toll in jobs at a time of spiralling unemployment.

Small firms are already bracing themselves for an increase in employers’ National Insurance Contributions (NICs) in April 2011. Using its own economic simulation model, CEBR tested the knock-on effects of adding 1p to employers’ NICs, paid by small and medium sized enterprises. The CEBR findings suggest that the NICs increase would cost the economy 57,000 jobs but only make a small dent in the gap in the public finances. In addition, the report states, these job losses alone would cost the Treasury around £900m in additional jobseekers allowance and other benefits.

The FSB has been calling for the Government to take steps to make it easier for the country’s 4.8m small businesses to employ staff, and so tackle rising unemployment and drive the economy out of recession. Polled FSB members believe cutting payroll taxes is the most important change the Government could make to encourage them to take on another member of staff. FSB members have also said that a reduction in business tax – such as corporation tax – would give them more of an incentive to take on another staff member.

The CEBR report found that if the Government raised the rate of corporation tax from 21 per cent to 26 per cent – the result of equalising the tax rate between big and small business – would cost around 100,000 jobs from the small business sector and reduce economic output by £4.3bn, while reducing the public sector deficit by only £1.6bn over 10 years.

Ahead of the Chancellor’s Pre Budget Report announcement, the FSB is urging the Government to freeze employers’ NICs completely.

John Walker, National Policy Chairman of the Federation of Small Businesses, said:

“This research by the CEBR shows that taxing small businesses to help reduce the public sector deficit is a dead-end that will instead cost us dearly in jobs and economic growth. The FSB has long been saying that small businesses are the country’s economic drivers and they cannot play their part in pulling the economy out of recession if they are faced with increasing taxes.

“The FSB is calling for a freeze in employers’ National Insurance contributions as the most constructive way of tackling the challenge of rising unemployment and continuing to put small businesses in the best possible position to draw the economy out of recession. We need to see the Government take on these practical proposals at a time when the country faces such financially testing times.”

Ben Read, Managing Economist at Centre for Economics and Business Research, added:

“Our report shows that the potential benefits to the public purse from increasing taxes on small business are at best minimal, and in the long term may actually damage public finances. Moreover, almost all empirical evidence shows that increasing business taxation provides disincentives for small businesses to engage in activities that they have particular strengths in: entrepreneurial activity, investment and innovation, and employment.

“In short, taxing economically beneficial activity is inconsistent with encouraging a strong recovery, and would damage growth and employment prospects.”

The FSB have carried out research since September 2008 to document the ongoing impact of the economic downturn on small firms.

A comparison of that data suggests that the economic position of small businesses is now starting to improve after reaching a low point at the end of last year. Nearly a quarter (23%) of small businesses report that they are now experiencing an increase in trade, compared with 16% in February.

Further, the cost of finance is becoming less of a concern. By the end of last year, up to 40% of small businesses had cited the cost of finance as a big problem, but this figure has now fallen to 25%.

And it seems the these trends have in turn had a positive influence on confidence levels, with 57% stating that they were ‘quite confident’ about the future of their business. As a result, 68% of business owners are planning to grow in the next six months, with many hoping to invest in new products, more staff and marketing.

The FSB is now urging the Government to help sustain small firms by supporting apprenticeships, short-time working subsidies and increasing the thresholds before Income Tax and National Insurance contributions are payable.

John Wright, National Chairman, Federation of Small Businesses, said:

“Small businesses are naturally flexible and innovative in recessions and these figures show that despite the very many negative forces on them, they are being cautiously optimistic and are looking to expand. Although we are certainly not out of the woods yet, many small firms are seeing increased footfall and finding it easier to obtain crucial finance in the winter months, when things were at their worst so far.

“The Government must look to small businesses to build the post recession economy and help them employ more people and ease the bureaucracy and tax burdens which many still face.”