HMRC Payment Support Service 

The Government has introduced a service designed to help businesses who are experiencing temporary tax flow difficulties and are struggling to pay the money that they owe to HMRC on time. HMRC already offers a system that means tax payments can be spread over a timetable that is affordable. 

The PBR announced that HMRC has launched the Business Payment Support Service to help businesses with difficulty paying, amongst other things, corporation tax, VAT, PAYE, income tax and NICs. A dedicated phone service has been set up for arrangements to be made. 

Information of the scheme can be found at the following web address:

http://www.hmrc.gov.uk/pbr2008/business-payment.htm  

Small Business Finance Scheme 

It was announced that a Small Business Finance Scheme will be launched “early in 2009”. This will be done with RDA’s support and be a temporary guarantee scheme which will reportedly provide up to £1 billion of supported lending by banks.   

Further detail of the scheme stated that it will be a source of working capital (from £1K to £1m) at improved rates and longer terms. It will be modelled on the Small Firms Loan Guarantee Scheme and be available to “a wider group of SMEs”. There will be a higher maximum for loan amounts and a wider range of types of debt will be available (ie.secured, unsecured and working capital). It will be available from the beginning of next year and will run to March 2010. The guarantees will be provided on a risk share basis with the banks. The terms of the risk premia and risk share with the banks will be announced at the launch of the scheme.  

RDA Loan Funds 

Earlier in November, the RDA, Advantage West Midlands, announced £4 million in loans to help businesses with short-term funding problems. AWM stated that the fund will be run on a fully commercial basis, providing individual loans of up to £250k in total. The PBR announced that other RDAs will launch similar loan funds, now totalling £25 million, to help businesses over the next six months.  

Capital Fund 

The PBR announced the development of a £50 million capital fund providing equity or quasi equity. This fund would be for SMEs that are overleveraged and can sustain equity to enable them to restructure their balance sheets and access more credit if appropriate.  

The fund will made up of bringing forward and amending the £30 million mezzanine fund announced at Budget for launch in 2009, bringing forward £10 million of funding for future Enterprise Capital Funds and a £10 million capital contribution from RDAs from their existing budgets for business support.  

The government says that they will work with other investors and the banks to urge where appropriate that they co-invest by converting their debt into equity.    

European Investment Bank

The EIB had already announced the availability of £4 billion of extra funding between 2008 and 2011. The PBR states that the negotiations between UK lenders and the EIB means that £1 billion of funds will be available to SMEs in the UK by the end of 2008.   

Exports Credit Guarantee Department 

For SMEs needing short term trade finance to take advantage of export opportunities, the Export Credit Guarantee Department will develop a £1 billion guarantee scheme on a risk share basis with banks. ECGD will work with the banks to devise the terms of the scheme with respect to risk and premia and maturities and levels of risk sharing with the banks. As trade finance is short term, guarantees can be rolled over during the course of the year and support trade of multiples of that total allocated amount. Also, the Fixed Rate Export Finance Scheme will continue for another year after the end of 2008. 

The following website offers limited further information: 

http://www.ecgd.gov.uk/index/news_home/pre-budget_report.htm   

Business Rates 

When premises are identified that should have always been subject to business rates, but have not previously received bills, business rates bills backdated to 2005 (the last business rates revaluation) are issued, for immediate payment. To reduce the cash flow impact on businesses, given current economic difficulties, the PBR announced that the Government will legislate to give businesses more time to pay certain backdated business rates bills issued before 31 March 2010. Businesses facing such bills will be able to pay their liability for previous years in equal interest-free instalments over 8 years, rather than immediately. Beneficiaries will include several occupiers of ports who have been affected by recent rating reviews.  

Further information can be found at the following website: 

http://www.local.communities.gov.uk/finance/busrats/bri62008.pdf    

Government Contracts 

The PBR announced that Government contracts worth more than £20,000 will be advertised in a single free online portal. The PBR claims that it will introduce measures to reduce bureaucracy and will make opportunities more transparent for small businesses.   

Capital Spending 

As part of its fiscal stimulus package the government is bringing forward £3 billion of capital spending from 2010-11 into 2009-10 and 2008-09 for housing, education, transport and other construction projects.  

TAX MEASURES

Small Companies’ Rate 

The government is deferring, for one year, the increase of the SCR from 21 per cent to 22 per cent. The SCR had been increased in phases from 19 per cent, since April 2007.  

The revenue effect for the Exchequer of this measure will be (in £million): 

2008/09: 0

2009/10: -20

2010/11: -460

2011/12: -30  

Tax Relief On Carry Back 

Businesses can offset unlimited losses against profits in future years, reducing the tax to be paid, or ‘carry-back’ the loss to set against profits of the preceding year, resulting in a tax repayment. The 2008 PBR announced a temporary extension for the carry-back of losses from one to three years, for losses up to £50,000. This temporary measure will apply for one year from 24 November 2008 for companies, and for the 2008-09 tax year for unincorporated businesses. Tax repayments from the extended relief will be made to businesses from Budget 2009. 

Further detail can be found on the HMRC website here: http://www.hmrc.gov.uk/pbr2008/pbrn3.pdf

 The revenue effect for the Exchequer of this measure will be (in £million): 

2008/09: -10

2009/10: -175

2010/11: -20

Empty Properties Rate Relief 

There will be a temporary increase of the threshold at which an empty property becomes liable for business rates. For financial year 2009-10, empty properties with a rateable value of less than £15,000 will be exempt from business rates, exempting an estimated 70 per cent of empty properties.

However, the government are standing by their position that, in the long term, beyond an initial rate-free period, it is right to charge rates when properties stand empty, since this increases incentives to re-let and re-use empty property, and avoids subsidising owners of empty properties. 

The revenue effect for the Exchequer of this measure will be (in £million):

2008/09: 0

2009/10: -185

2010/11: +10    

VAT Reduction

The VAT rate will be temporarily reduced to 15 per cent with effect from 1 December 2008 to 31 December 2009.

This is the centre piece of the fiscal stimulus that Gordon Brown touted before the report. The PBR does identify potential risks, such as the extent to which the VAT cut is passed on and whether it will stimulate spending. The Treasury has assumed that the majority of the VAT cut will be passed through to consumer prices.

The Treasury argues that the downside risk to consumer spending from lower pass-through would be tempered by the upside risk to corporate profits and perhaps therefore employment if companies were to retain more of the temporary VAT rate cut.

The revenue effect for the Exchequer of this measure will be (in £million):

2008/09: -3,800

2009/10: -8,600

2010/11: 0  

National Insurance Contributions 

The PBR announced a 0.5 per cent increase in the employee, employer and self-employed rates of NICs from April 2011. Increasing employer NICs by 0.5 per cent will raise the government £2.65 billion in 2011-12.

Fuel Duty 

The PBR announced that the 2 pence per litre increase in fuel duty planned for 2008 will now take place on 1 December 2008.

As pre-announced in Budget 2008, main fuel duties will further increase by:

1.84 pence per litre on 1 April 2009; and

0.5 pence per litre above indexation on 1 April 2010.  

Income Shifting

The Government is deferring action and will not bring forward legislation on income shifting at Finance Bill 2009. 

The revenue effect for the Exchequer of this measure will be (in £million):

2008/09: 0

2009/10: -25

2010/11: -260

2011/12: -200