Credit help Companies

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Fiscal incentives to help companies cope with the credit crisis Pre Budget Report November 2008 announced some good corporate information. Increasing the corporate income taxation for small enterprises from 21% to 22% was postponed until April 1, 2010. In addition, trade loss of up to 50,000 can now be recouped for up to three years.

Furthermore, HMRC has stated that it will endeavour to reconcile reviewed pay schedules with the taxpayer faced with liquidity issues. It has also indicated that it will reduce the interest rates on delayed taxes by around 1%. The aim of these actions is to help companies at a sluggish moment when doing their business and raising credit from banks is more challenging.

On 1 April 2009, the corporate income taxation for small enterprises was to be increased from 21% to 22%, but this rise was deferred to 1 April 2010. Small business rates apply to businesses with a profit of less than 300,000 (although this threshold is lower if the business has one or more affiliates).

Because of the current recession, companies that have previously been paying taxes at the higher rates may find that their earnings will drop below the small business threshold and therefore attract only 21% taxes. The postponement of the rise in the VAT rates is therefore likely to concern more companies than would have been the case in the past.

It is good to know that this action will lower the burden of taxation for small companies in 2009/2010. At present, companies can recoup an indefinite amount of trade deficits against gains from the prior settlement cycle and receive a refund of taxes. In the Pre-Budget Report the action notified will extend this carried forward to the two years prior to the prior payroll cycle, but up to £50,000.

Gains from previous accounting periods are initially credited. These measures apply to companies of all size and to partnerships. Given the 50,000 ceiling on trade loss that can be recouped, however, this is likely to be more beneficial for smaller companies. It is a good thing since more loss carrybacks can be made, which leads to a higher reimbursement and thus helps the companies in their liquidity management (before the change the loss carryforwards would have to be made in order to decrease deferred taxes).

Companies that find it difficult to pay all of HMRC's managed corporate and personal revenue taxation, social security and value added taxation can now turn to Revenue's Business Payments Support Services, which were introduced in November 2008. Revenue shall not be subject to any surcharge for delay on amounts contained in the agreement, although interest on taxation, where applicable, shall continue to be due.

They will help to support companies with their liquidity in a difficult business environment.

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