Business Owner Debt

The previous Government tried to ban this practice in 2007, however the revenue estimate that nearly £200m in tax is being avoided in this way. HMRC continue to target small family businesses.

In its impact assessment of the changes, the Government admits that the cost to business, charities or voluntary bodies of moving 21-year-olds to the adult rate will be about £48.2 million

The Federation of Small Business (FSB) has been highly critical of this proposed move, accusing the Government of making hard working entrepreneurs pay the price of protecting pensions of millionaires.

So, you might say that Mr Cable – and everyone else who talks about this – is worrying over nothing; British companies already have a lot of the cash they need to fuel the recovery. But of course, it is not remotely that simple.

Some people feel that the dilemma for HMRC, in the light of falling tax receipts, is deciding if a business (a) is using the scheme as a convenient cashflow source, or (b) is waiting for definite cash inflows to arrive and hence needs time to pay its tax, or (c) HMRC is unwittingly acting as life support for the particular business.

These figures come after those published last week by the British Bankers’ Association, which revealed that traditional bank lending to small businesses in May 2010 fell by more than £100m compared with the same period in 2009.

However, Scotland saw a modest rise in payment times beyond agreed terms, from 23.38 days in the second quarter of 2009 to 23.65 days for the same period this year, while late payments in the North West averaged 25.16 days to overtake London as the slowest paying region.

Balancing the books is a good thing for every business, and the Government is no different in this regard, but let us hope that the Chancellor has recognised the ripple effect that will ensue from public expenditure cutbacks, and the savings more than offset the costs to the country of business failures and consequent job losses’ impact upon the Benefits budget.

“This is extremely important for Britain as we come out of recession and go into recovery.”

Treasury Exchequer Secretary David Gauke said a complex tax system created “uncertainty and instability”, sending the wrong signal to businesses wanting to invest in Britain.