The fact that the government’s most recent budget was conceived in an effort to placate small business has been widely documented and if you managed to catch Channel 4’s ‘Ask the Chancellors’ debate, it was clear that all of the main political parties, had small business firmly high up on their agenda.
In his last budget before the general election, the chancellor not only reduced business rates and put pressure on banks to lend to small businesses and recent company formation owners, he also mad the government’s ‘Time to Pay’ tax initiative a long-term economic policy.
Initially introduced as a short term measure to help struggling companies deal with their tax burdens during the recession, the scheme allows businesses to spread their tax payments throughout the year. However, not all businesses are accepted on to the scheme and in the wake of the chancellor’s budget, many accountants are concerned that small businesses will rely too heavily on it and ignore bigger financial issues.
James Mason, founding partner of accountancy firm ‘Masons’, comments; “ While the government’s ‘Time to Pay’ scheme has been welcomed by the majority of the SME sector, it is extremely important that small businesses and companies that have recently been formed, don’t use it as a way of masking a business’s greater financial problems.”
“Understanding is absolutely crucial; company owners need to be aware of their tax obligations and gain a complete understanding of their cash flow. Otherwise this scheme has the potential to lull companies into a false sense of security and damage as many companies as it will help.”