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BUDGET BRINGS LIGHT AMID THE GLOOM FOR SOUTH WEST SMEs, SAYS BISHOP FLEMING

This week‘s Emergency Budget presents a raft of opportunities for small businesses across the South West, despite the headline tax increases and cuts in public spending.

This is the view of Andy Richens, technical tax director at Top 50 accountancy firm Bishop Fleming, which has offices in Bristol, Exeter, Plymouth, Torquay and Truro.

Mr Richens believes Chancellor George Osborne‘s decision to grant new businesses a National Insurance (NI) “holiday” could prove a major boost to the region‘s economy.

And he says changes to the level of NI and Corporation Tax could lead to a major increase in the number of sole traders and partnerships becoming limited companies.

“Amid all the doom and gloom about tax increases and spending cuts, there is a real opportunity in the South West to make use of the employer NI holiday announced by the Chancellor,” says Mr Richens.

“This says that for new businesses set up over the next three years, employers will enjoy an NI holiday of £5,000 for each of their first ten employees. The South West is already a hotbed of small business activity and I believe this measure could advance  that position.

“Despite this there will still be a 1 per cent increase across the board in NI rates from next April 2011, and the main Corporation Tax rate will come down by 1 per cent at the same date, and by 4 per cent in all 2014.

“Together these measures increase the effectiveness of dividends, which are not deductible from Corporation Tax which is coming down but at the same time, not chargeable to National Insurance, thereby avoiding the increases. The net result is that incorporation is back on the agenda for partnerships and sole traders alike.”

Mr Richens adds that measures announced in the Budget on Capital Gains Tax and Furnished Holiday Lets will also have a major impact on the region.

“Capital Gains Tax (CGT) has now increased to 28 per cent for gains (or part) where income and gains exceed the higher rate threshold. For income and gains within the basic rate band, the CGT rate remains 18 per cent. Meanwhile Entrepreneur‘s Relief increases to £5 million, at the 10 per cent rate, so that for companies where property is held outside the business, rent received can restrict the relief.

“Now is the time for business owners to review whether rent should be reduced, and replaced by dividends, as above.

“Furnished Holiday Lettings (FHL) reliefs will stay in place, subject to a review next year on the number of days let to qualify, and possibly on loss relief set off. This means that for all FHL owners in the South West, of which there is of course a large number, now is the time to undertake any capital expenditure for improvements.”

ENDS                                   24th June 2010

For further information please contact Neil Fraser on 01275 390 553 or email neil@sturgesvandamme.co.uk or visit the Bishop Fleming website: www.bishopfleming.co.uk