SME Blog

Budget 2007 - the good news

The good news for UK SME's on the budget is on VAT.  The cash accounting VAT scheme can now be used for businesses with an annual turnover limit up to £1,350,000 from 1 April 2007.  Currently the limit is set at £660,000.  That's a huge increase.

The VAT cash accounting scheme allows you to account for VAT (output tax) on your sales on the basis of payments you receive, rather than on tax invoices you issue. However, if you choose to use the scheme, you can only reclaim the VAT incurred on your purchases (input tax) once you pay your supplier.

This is good news for businesses with large trade debtors and good news generally for cashflow.

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Angry SME's

SME owners are angry with UK Chancellor Gordon Brown. Why?  Corporation Tax for small UK companies is going up in stages from 19% to 22%. 

Check out the recent BBC article on the tax rises.  The comments are from real people at the sharp end running their businesses. 

Raising taxes is never going to popular, but raising taxes for the small companies whilst corporation tax is going down for the large companies is rubbing it in.  Cushioning the blow are accelerated tax allowances on capital expenditure, but not all small companies need substantial capital expenditure each year.

The real pity for me is the lack of a strong voice for SME's.  You can bet there would certainly be a lot more uproar if the increases hit the large companies instead of the small. 

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Keep it simple

I have an overriding philosophy in life of trying to keep things simple.  It’s a good philosophy, but the problem is this:

It’s easy to make simple things complicated

It’s hard to make complicated things simple

A complicated problem can be broken down to something simple.  It’s a case of breaking the problem up into small easy stages.  It takes time, but the benefits are worth it.  The big mistakes tend to happen when people don’t understand what they are doing.

This technique works well when you can apply logic.  Don’t use it for relationships (that needs the Sorry technique).  It also doesn’t work with the UK tax system.  Applying logic to the UK tax system to solve a problem is a dangerous game played with loaded dice.  The UK tax system is renowned as one of the most complex in the world.

Imagine then my surprise when I found out there is a Dummies Guide to Paying Less Tax 2006/07.  Quite amazing; I’ve ordered a copy to find out more.  Do they skate around the complex issues or break them down. Do they say "it depends". I would have loved a copy 18 years ago; it would have been a joy to witness the reaction from the Old School partners.

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