VAT rate change

There is an opportunity for businesses who make a continuous supply of services to charge the first 6 months of their services in 2010 at 15%. This will benefit customers who are not VAT-registered and, hopefully, generate significant customer goodwill for the supplier.

Firstly, a tax invoice for the next 6 months supply of services must be sent to the customer with a tax point of 31st December, 2009 or earlier. This is vital. This should be the only VAT invoice in respect of these services.

Businesses must not be connected and the amount involved must not exceed £100,000.

For businesses using the cash-accounting method, there will be no drawback to raisng 6 months invoices in one go. However, businesses accounting under the standard VAT scheme will end up paying the VAT to HMRC at an earlier date.

There was no U-Turn on the planned changes to taxation of Furnished Holiday Lettings (FHL). This means that there will be no distinction in tax law between a conventional buy to let and a property used primarily for running a self-catering holiday business. There is an opportunity to sell a FHL before 5th April, 2010 and claim entrepreneurs relief on the capital gains tax. This won't be possible after that date.

More PBR speculation

Richard Tyler, entreprise editor of the Daily Telegraph, makes some interesting predictions. He reminds us that some existing taxes are going up. Not least VAT, back to 17.5pc after the 2.5pc point reduction for the past 13 months. It is meant to take effect on January 1 but the Chancellor is likely to say that small businesses have been given 28 days to change their pricing after the New Year.

There is a chance that the Chancellor could signal that VAT will rise further. A draft Treasury document sent to the Commons library by mistake after last year’s pre-Budget report showed that the Treasury had seriously considered increasing VAT to 18.5pc in 2011. If this turns out to be true it would raise £5bn.

Mr Darling also has to decide whether to go ahead with the one percentage point rise in smaller company corporation tax from 21pc to 22pc. He has delayed it once and could do so again. And despite adding to the cost of hiring staff, employers’ national insurance contributions are still due to rise by 0.5 percentage points in April 2011.

The main changes will be in personal taxation. But how much detail the Chancellor provides before the General Election is anyone’s guess. The new 50pc higher band of income tax for those earning over £150,000 a year, the clawback of personal allowances for those earning over £100,000, and the restriction of tax relief on pension contributions for those earning over £150,000 are all coming in.

Smaller company owners will look to see if Mr Darling keeps the threat of a family business tax in the box. Before the recession, the Treasury was keen to tackle companies using dividends to distribute income to related parties to avoid national insurance contributions. Speculation is also rife that capital gains tax could rise from its 18pc flat rate, given that a 50pc rate of income tax provides a strong incentive to take income as company shares. Accountants PKF say that the Chancellor may announce that short term gains, for example, gains made on assets held for less than a year, will be liable to tax at income tax rates.

The Government wants to be seen to be helping businesses. So expect to hear about the success of HMRC’s time to pay service – used by 150,000 businesses to defer £4bn in tax over the last year. There may also be an update on the Chancellor’s own pet scheme to allow businesses to defer up to 60pc of this year’s inflation-busting rise in business rates for up to two years.

The future of financing schemes, like the £1.1bn Enterprise Finance Guarantee, a bank loan scheme that comes to an end next March, should also be made clearer. There should also be an announcement on the launch of a series of new Government-backed equity and mezzanine debt funds, to be delivered by a National Investment Corporation and designed to tackle the lack of private money investing in small and medium-sized companies.

More money may also be set aside to encourage businesses to hire staff and take on apprentices. On the downside, training subsidies through schemes like Train2Gain could potentially be cut. He is likely to talk about his efforts to build a low carbon, knowledge economy and may even offer a few small incentives to encourage the take up of environmental technologies.

We will just have to wait to see.

Buy local campaign

TaxAssist Accountants, the UK’s leading accountancy and taxation service for small businesses, are championing a Buy Local campaign aimed at encouraging consumers and local businesses to come together and support each other during the economic downturn.

Local accountant, Nigel Lomax, explains "We feel strongly about supporting local small businesses who need the right levels of assistance. We are advising businesses to manage their cash flow correctly and giving further recession beating tips."

TaxAssist Accountants is also supplying small businesses that have visible premises with window stickers in order to send the message out to the general public.

Nigel also comments "Whilst we are part of a network of accountants with national coverage, we are a small local business in our own right. We trade with local businesses and are very much a part of the community. The small businesses we have spoken to are really pleased to support this campaign by placing the stickers in their shop or office windows which is very encouraging."

TaxAssist Accountants emphasis is to support small businesses in these difficult times by offering a proactive service that represents real value for money.

To improve cash flow – often a major cause of difficulty for small businesses – TaxAssist Accountants agrees fixed fees in advance, so there are no nasty surprises or unexpected bills.

Pre-Budget Report prediction from expert economist

Roger Bootle, economic advisor to Deloitte, expects the Pre-Budget Report (PBR) to be a double-edged affair, with measures to provide short-term support for the economy accompanied by plans to bring public borrowing down more quickly further ahead. He suspects that Mr Darling will attempt to balance the various considerations by unveiling a package designed to "go for growth" over the next year or so, accompanied by medium-term measures to put the public finances back into a more sustainable position. Near term support for the economy may come from the further bringing forward of capital spending from future years, as well as temporary tax cuts aimed at the housing and labour markets. Measures to improve the fiscal position further ahead may incorporate further rises in VAT and capital gains tax, and much deeper cuts in public spending. Of course, the Chancellor will clearly have one eye on next year's general election.

FSB lobbying for reversal of furnished holiday let rule changes

I notice that John Wright, FSB National Chairman, is lobbying for the 6th April, 2010 changes to taxation of furnished holiday lets to be delayed/cancelled. It's a good sentiment as its only justification seems to be tidying up to meet EEC law. But isn't a bit late.