OK, hands up all the Charlies who rushed out and bought IT equipment before the tax breaks expired on March 31, as advised by their accountants, advisors and even the last Business Solutions supplement?
The thing was, the 100% tax allowance for IT purchases expired at that stage so it looked like too good a thing to miss. That nice Mr Brown certainly thought so; he reinstated it just over a week later. No, you won't be penalised if you bought in that short period of time as tax relief is calculated some time after the event, but you can't help but wonder whether IT sales will be skewed for early April as a result. The small business economy is booming, it seems, but not yet booming enough for Uncle Gord in terms of e-business.
It's actually difficult to see why this was introduced as a temporary measure in the first place. Making the 100% tax allowance permanent simply brings it into line with the tax regime for leasing, where 100% also applies.
It's also worth noting, particularly for start-up business people who may not be aware of how these things work, that this doesn't mean you get 100% of the money you spend on IT back; it means you can claim 100% of the allowance you'd get for it in the first year, rather than spreading it over three. Nonetheless, it's a useful little bonus to have.
On the day of the Budget the Guardian's Online section commented that the new Employment Act would effectively make a lot of people go out and buy new equipment just when the tax break had vamoosed, but as we went to press it was put back in. This is useful for both incorporated companies and unincorporated business, according to chartered accountant Mike Lewis.
Also useful is the fact that the VAT threshold has moved up to £56,000. VAT can be a bit of a mixed blessing. It turns you into an involuntary, unpaid tax collector for customs and excise, but it also forces you to keep your accounts up to date (and yes of course you should be doing so anyway, but not everybody is that assiduous). And since you can't keep the money you collect it's academic as to whether you have it or not. The important thing is that you can get your VAT back on all of your purchases so, as long as your customers are VAT registered too, you can't actually lose. If they're not - and you can now deregister - you can cut prices if you wish. If, however, your accounting system is at all elderly, or not set up for VAT, you'll need to upgrade.
On the subject of VAT it could be worth talking to your accountant if you turn over less than £100,000 per year since you will be eligible for the new flat rate. This will be simpler to administrate, although people who have already computerised their accounts will need to change their systems again to work alongside it (and, it has to be said, announcements from the software vendors about how they're going to cope with this are few and far between as yet). The difference in financial terms, mind you, is likely to be microscopic - it's a red-tape saving measure.
There was other good stuff in the Budget for the smaller trader, outside of IT. As many as 40 regulations will be scrapped in order to reduce the red tape that surrounds the business community, and a lot of taxes - corporation tax, small business corporation tax and capital gains - remain frozen. Much of this was heralded in the budget statement in November as were extra incentives for training, research and development.
Downsides for the businessman, including increases in stamp duty on rental leases later this year (although not for business premises purchasing) and an increase in landfill tax, were inevitable. They were offset by increased funds available for small business loans and capital injections.
A number of conclusions spring to mind. Firstly, that this budget was good for small business, and given a contracting economy it would probably be unreasonable to expect or anticipate anything better. Second, though, as highlighted recently by the Federation of Small Businesses, the rules remain weighted in favour of the incorporated as compared with the unincorporated business.
Take a freelance designer, photographer, journalist, whatever; their tax allowances are based on personal allowances. If they go incorporated and become a limited company their initial allowance shoots up to £10,000 before corporation tax kicks in and they can pay themselves by dividend, at which stage their tax burden goes from up to 40% to 22%, paid by the 'company'. Given the growth in self-employment you might expect this to be addressed in future budgets. A balance needs to be struck between creating a regulation for people working in isolation and not treating them the same as large corporations.
Overall then, useful rather than thrilling points for small business including the extension of the most obvious incentive to get geared up for trading and operating electronically. Now if they'd find a way of supplying business owners with enough time to actually do anything about it they could be on to a winner.
