With a backdrop of global economic uncertainty, Chancellor Alistair Darling has announced a raft of measures in this year's much-anticipated Pre-Budget Report, aimed at stimulating the economy and boosting consumer confidence.

Rather than go into everything in detail, A4G have summarised the issues that affect owner-managed businesses in this one-off special newsletter. The big change of course was the cut in VAT from 17.5% to 15% for a period of 13 months, starting from 1 December 2008. There are also however, other changes that may have an impact on your decisions.

Do please contact us for specific advice about how these announcements might affect you or your business.

In a move that will affect all businesses registered for VAT, the standard rate of VAT has been cut from 17.5% to 15%, effective from Monday 1 December 2008. The rate will remain at 15% until 1 January 2010 when it will revert to 17.5%.

Zero-rated supplies, such as basic foodstuffs, children’s clothing and books; exempt supplies, such as education and health; and supplies subject to VAT at 5%, such as domestic fuel and power are not affected by this change.

Anti-avoidance legislation will be introduced in the 2009 Finance Bill to ensure that businesses are not able to use artificial arrangements to reduce the VAT rate on goods or services to be provided after the VAT rate reverts to 17.5%.

Those businesses that are on cash accounting might find things a little complicated, especially if they don’t use a good computerised accounts package. Any amounts received after the change where invoices were issued before the change will of course suffer VAT at the rate existing when the invoice went out i.e. 17.5%.

Accounts packages set to account for VAT on a cash accounting basis should do this automatically but those who keep manual records and are on cash accounting will need to be really careful not to get in a muddle!

The changes to the VAT rate will mean that you should change your accounts package immediately after posting the last sales invoice issued for November. If you use Sage this is done by undertaking the following change:

Click on settings, configuration, click on the tax code tab, double click on the T1 tax code and change the rate to 15%.

Where payment has been received or a VAT invoice issued before 1 December 2008, VAT will have been charged at 17.5%. But where that payment or invoice relates to goods or services that are provided after 1 December 2008, the VAT rules allow the supplier to apply the new VAT rate, 15%, to the earlier payment or invoice.

Suppliers who choose this option are required to issue a credit note to their customer, if they have issued a VAT invoice, to evidence the credit for the reduction in VAT that is now due. VAT Regulations specify that within 14 days of a change of rate, a credit note must be provided to the recipient of a supply. As part of the pre-budget report changes however, the period within which such credit notes must be issued has been extended from 14 days to 45.

With effect from 1 April 2009, the test that requires a business to check if its total income is less than £187,500 before entry into the VAT Flat Rate Scheme will be removed. Instead, eligibility to join the scheme will be determined solely by the taxable turnover of the business, which must be less than £150,000.

The Government had planned to increase the small companies’ rate (SCR) of corporation tax from 21% to 22% from 1 April 2009.

This has now been deferred until 1 April 2010.

The period for which current trading losses from businesses can be carried back against previous profits is to be extended from one year to three years. Unlimited losses may be carried back for one year and losses of up to £50,000 may be carried back to the previous two years.

This is significant to any business who has made a loss but perhaps even more so to property developers who may have suffered or are about to suffer significant losses on properties that have been developed, but whose underlying value has fallen as a result of the property crash.

This is a temporary measure for one year only. A company may make a loss relief claim under the new rules when it makes its return for an accounting period ending in the period 24 November 2008 to 23 November 2009.

Unincorporated businesses may make a loss claim under the new rules as soon as they have calculated their losses for their basis period for the 2008/09 tax year.

The Chancellor announced various measures designed to help small businesses with working capital and investment needs.

Early in 2009, the Government will launch a Small Business Finance Scheme – a new temporary guarantee scheme to enable up to £1 billion of new Government supported lending by banks. We are still awaiting full details of these schemes although undoubtedly there will be a raft of conditions to work your way through!

The Government is temporarily increasing the threshold at which an empty property becomes liable for business rates. For the 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% of empty properties.

The controversial proposed legislation designed to prevent ‘income shifting’ (basically where someone who runs a business puts shares into their spouses name in order to obtain the benefit of two lots of basic rate tax band) will not now be introduced in April 2009.

However, the Government has said that this element of tax is still in its sights.

HM Revenue and Customs has introduced a new Business Payment Support Service, which is designed to assist those businesses whose cash flow has been adversely affected by the economic downturn.

The service allows business owners who are concerned about making their tax, national insurance or other payments, to contact HMRC to discuss a range of payment options tailored to their business needs.

The scheme includes a Business Payment Support Line for new enquiries, which is available on 0845 302 1435, and is open from 8am to 8pm Monday to Friday, and 8am to 4pm at weekends

At present the capital allowances that can be claimed on cars costing in excess of £12,000 are restricted to £3,000 per annum. Following the proposals in the pre-budget report, these rules will now be scrapped.

From 1st April 2009, expenditure on cars, no matter how much they cost, will be allocated to one of two plant and machinery pools depending on the CO2 emissions for that vehicle. Cars with CO2 emissions exceeding 160g/km will attract allowances at a rate of 10% and those with less will attract allowances at a rate of 20%.

For those of you unfamiliar with the technical data behind the car specifications, an example would be the Mondeo 2.0l TDCi Edge, costing £18,545 and emitting CO2 of 156g/km. The initial writing down allowance would be £18,545 x 20% = £3,709.

A similar petrol version of this car, the Mondeo 2.0l Edge, costing £18,145, has CO2 emissions of 189g/km. This would be subject to an initial writing down allowance, at 10% i.e. £1,814.

Although the allowances are reduced whilst you own it, you could still get the allowances you have missed out on when you come to sell, which makes us wonder why it will make much difference to people’s purchasing decisions. Perhaps the Chancellor thinks that it will placate the “green lobby”.

There is also a restriction for leased cars but unlike purchased cars, you don’t get the allowances back at the end. In simple terms, it is better to buy “gas guzzlers” than lease them, unless the VAT advantages outweigh the tax advantages. Better to talk to us if you’re not sure.

Of course, what we all know is that the giveaways are not completely free. A small increase in national insurance is being lined up for 2011 and income tax rates for individuals earning more than £150,000 will increase at the same time. It looks like clients will be in even more need of a good tax-planning accountant by then!

In these exceptional economic circumstances, I want to take fair and responsible steps to protect and support businesses and people now – while putting the public finances on the right path for the future. Chancellor of the Exchequer, Alistair Darling

Listening to the Chancellor ' s speech, no one can be in any doubt that the Prime Minister ' s claim to have abolished boom and bust is one of the biggest deceits ever told to the British public. Shadow Chancellor, George Osborne

If I were marking the Chancellor’s report card, I’d say ‘could do better’. David Frost, British Chambers of Commerce

Many of these measures […] will give small businesses a welcome breather from the taxman and allow them to concentrate on sustaining their business, supporting their staff and growing the economy in the long term. John Walker, Federation of Small Businesses

"Listen to the people who actually do the work." Jack Welch