Small business wins a delay to increase in corporation tax

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In the face of a downturn in consumer demand for goods and services, small businesses have argued that they need special help to see them through the crisis.

A key measure Alistair Darling announced was scrapping the rise in small business corporation tax from 21% to 22%, which he announced in his last Budget. This was due to come into effect in April next year but could be delayed for at least another year or done away with.

The Treasury believes small business remains the backbone of the economy and that the sector needs help holding on to its cashflow.

Cancelling the planned rise in corporation tax will save small businesses a total of £400 million a year.

Other changes to business tax announced today included relaxing deadlines for the payment of VAT, National Insurance and employees' PAYE. All these should help smaller companies' cashflow.

Andrew Pegg, managing director of property adviser Midas Corporate Consulting, said: "The moves are small beer but better than nothing. The VAT cut is obviously beneficial, but I can't see it having a substantial impact. And rather than giving incentives to take on the unemployed, I think the government should be giving aid to small businesses to keep people in employment in the first place".

Small businesses have been hit by a lack of availability of credit making overdrafts and loans dearer while also finding it harder to get credit insurance to cover the event of clients going bust before paying bills.

New figures from the insurance industry today showed why they were so choosy about who they cover. The total value of trade credit insurance claims in the third quarter of the year was £97 million - up 58% from £61.4 million a year earlier. The number of claims was up 34% at 6805.