I think there are some glimmers of hope and respite for small businesses that we can pull out of Chancellor’s Pre Budget Report.
From a motoring perspective those small business owners and staff that use private cars on business – funded by a personal contract hire (PCH) – will see a 2.5% drop in the rate they pay.
As Robert Wastell from CompareContractHire.com put it to me last night: “If anybody’s about to sign a PCH deal – don’t! Put it off until December.”
However, there was no change in the approved business mileage rates – or AMAPs. You can use AMAPs – see our Law and Tax article on AMAPs here – to repay business mileage in your private car.
This point, and the fact that the delayed 2p rise in fuel duty is going to be foisted on us, means one thing: choose a fuel-efficient car. Think low CO2; and don’t take your eye off the fuel issue.
This is what John Lewis, the boss of the British Vehicle Rental and Leasing Association (BVRLA), had to say: “While the reduction in VAT is temporary, the increase in fuel duty is not. Businesses can reclaim the VAT cost of their fuel regardless of the rate. But they cannot reclaim fuel duty.”
In other areas the temporary Small Business Finance Scheme will make £1billion available in loans for small firms; and allowing small firms to offset their losses up to £50,000 over the last three years is also useful.
So, too, the deferral of the Corporation Tax rise; and the ability for small businesses to spread their tax payments out across the year on a timetable they can afford.
As John Walker, the national policy chairman for the Federation of Small Businesses (FSB), put it: “This will bring welcome relief to those firms that desperately need to stabilise their cash flow.”
Finally, back to motoring. Vehicle Excise Duty (VED) or road tax to you and me. A new 13-band system based on CO2 is being introduced from April. But the worst increase you’ll see – for the moment – is £5. Which just brings me back to my central point.
Think low CO2. Next April changes to the Corporation Tax treatment of cars means that a vehicle must be below 160g/km to get the most beneficial tax treatment. (Go to Paul Harrop’s Special Report for more on this: CO2 based vehicle Corporation Tax ahead.)
My Audi A4 2.0 TDI is doing an average of 44mpg (official figure of 53.3mpg). But that’s fine as the driving is a mixture of local driving; and motorways. It has CO2 emissions of 139g/km and a business car tax banding of 18%. Anything at that level – or up to 160g/km – will keep your motoring costs down. And help your cash flow.
VAT reduction favours personal contract hire
