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Budget 2009 - Tax rise uncertainty would harm small businesses

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One of the leading accountancy bodies has called on the Government to think very carefully before implementing tax rises in the 2009 Budget, or in future years.

Head of Tax at the ACCA (Association of Chartered Certified Accountants), Chas Roy-Chowdhury, said that rumours or uncertainty over taxation would not help small businesses

Key issues for Budget 2009

The ACCA is keen to see action on many points during Budget 2009, including the following four which are of particular interest to small companies:

No significant tax rises

While the tax take is down, there needs to be a period of stability to allow the fiscal stimulus package to take hold. To talk of imminent tax increases is acting as a break for the full impact of the stimulus measures to take effect, causing individuals and businesses to hold back spending because they know tax rises are just around the corner. The ACCA is specifically referring to Income Tax, National Insurance and Corporation Tax increases.

VAT and Stamp Duty Land Tax

The accountancy body considers that the temporary cut in VAT has had little impact. The VAT rate should be restored early and its savings used to withdraw Stamp Duty Land Tax for 6 to 12 months in order to stimulate the housing market.

Business Losses

The period of claims to carry back losses of £50,000 should be increased from 3 to 5 years. Many small businesses have been suffering a lean trading period for some time and may not have sufficient profits against which to offset their losses. The United States has also recently increased the loss carry back period to 5 years in a move to help small businesses.

‘Income shifting’ clarity and simplicity

Income shifting should not be viewed as an errant way of managing a business’ accounts and profit, especially when SMEs are under pressure to survive. ACCA also questions how relevant the income shifting decision – made nearly two years ago - is in the current climate. The Government should make a clear statement that it will not seek to legislate in this area for the foreseeable future.

Posted April 2, 2009

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