Alistair Darling has announced a temporary £1bn finance scheme to help small businesses access bank loans in today’s Pre-Budget Report.
He said the scheme, which will guarantee up to £1bn bank lending to small businesses, would cover loans ranging from £1,000 to £1m and was a direct response to pleas from small companies struggling to access finance during the credit crunch. A separate £1bn guarantee scheme was also announced to support lending to small exporters.
Darling also said a quarter of the £4bn loan offered by the European Investment Bank (EIB) to encourage lending to small businesses had now been allocated to UK banks, while vowing to closely monitor banks to ensure they lend to small firms at affordable rates.
Commenting on the scheme, Mary Monfries, head of tax services for entrepreneurs at accountancy firm PricewaterhouseCoopers, said: “While we’re yet to see the detail, if this is really making additional finance of up to £1m available now to small business, then it will be welcome.”
The chancellor also announced that the controversial hike in the small firms’ corporate tax rate would be deferred, leaving it at 21%, along with a temporary increase in the threshold at which an empty property becomes liable for business rates, following reports of firms knocking down buildings to avoid the tax.
Andrew Jupp, head of tax at business advisers Tenon, commented: “These are very welcome measures for entrepreneurial and family businesses, although I had hoped the chancellor would reduce the small companies rate back to 20% or even lower. These entrepreneurial businesses are the lifeblood of the UK economy and they need all the help they can get”.
Other initiatives revealed to help small businesses include a £50m fund to convert businesses’ debt into equity; plans to allow struggling businesses to pay their tax bills when they can afford to and more tax relief for once-profitable businesses now making a loss.
As from Monday, the rate of VAT will also be slashed from 17.5% to 15% for one year to help boost consumer spending, while the widely touted 45% income tax rate for those earning more than £150,000 will be introduced if Labour win the next general election.
© Crimson Business Ltd. 2008