Small businesses are clearly feeling a state of relief today after finding out that they will be able to access a fund worth billions of pounds in new finance. They also have the added bonus of paying less tax and even have the opportunity to delay the taxes they owe.
However, it was clear that if these measures were to be made available now, we would have to pay a heavier price later on down the line and Chancellor Alistair Darling has announced that this short term fix will force employers, and employees, to pay an overwhelming £3 billion from 2011 for National Insurance, a move not welcomed by director-general of the British Chambers of Commerce, David Frost, who said, “The proposal to increase National Insurance contributions is wrong…At the very time when the economy should be coming out of the recession, businesses will face an extra tax on employing people. This is not the way to reduce unemployment.”
Alistair Darlings attempts to ease the financial burden on small businesses have been met with appreciation, but also uncertainty, and some small business leaders have criticised the Chancellor for not doing enough to aid small and medium sized businesses. Russell Lawson, of the Welsh Federation of Small Businesses, said, “You can always say we wanted more but genuinely we were expecting more from the pre-Budget report.
“Things like businesses being able to create their own business plans to pay tax so they can pay more at different times of the year will be welcomed by some businesses which are busier at certain times of the year, but they are still being taxed. So measures like that are helpful without being dramatic.”
The new fund that the Government has made available will offer loans between £1000 and £1 million but more importantly the funding will be a lifeline to small businesses, keeping them afloat. The fund has been made available as an attempt by the Government to also keep small business in the country.
An accountant at PricewaterhouseCoopers, Simon De Young, said, “If this Budget is about giving small business a boost now, then it appears to deliver, with specific targeted measures.
“The projected increase in National Insurance from 2011 will be one of the ways this saving is clawed back in future years.”
Positive appreciation has been widely witnessed from small businesses and those connected with them and the general mood of the country is that the relief will go a long way in saving the small businesses of the UK. The director-general of the Confederation of British Industry, Richard Lambert, believes as well that the measured announced yesterday will be a great boon for the small sized industry in Britain, saying, “The £5bn package comprising the small business finance scheme and loans from the European Investment Bank should, if well and speedily implemented, give critical help to small firms in need.
Lambert added, “The exemption of foreign dividends from taxation is very welcome. It will help to stem the incentive to move tax domicile overseas…The fiscal stimulus through the cut in VAT has the advantage of immediacy but only time will tell whether it increases spending by individuals significantly.”
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