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Business Payment Support Service and Small companies tax rate

In response to the economic downturn the Government introduced the BPSS on 24 November 2008. The BPSS offered a deferral of payment of tax liabilities to viable, but struggling, businesses to reduce the risk that lack of available credit would harm the economy. The Chancellor has now announced an extension of the BPSS for a further year to 5 April 2011.

Businesses already making use of the BPSS should ensure that they have a business plan showing a return of their activity to a firmer financial footing before seeking to rollover an existing deferment of tax payments. This is because the BPSS is available only to viable businesses, and continued cash-flow problems may lead the BPSS to question the sustainability of the business.

Small companies tax rate

The proposed increase in the small companies corporation tax rate from 21% to 22% has been deferred to 1 April 2011. The 22% rate was originally proposed for introduction on 1 April 2009, but was deferred in the 2009 Finance Act due to the poor market conditions. The announcement is expected to be welcomed by the SME corporate sector. There have been no changes to the profit limits for small companies rate, although there are proposed changes to the rules for “associated” companies. The changes may benefit some companies with reduced limits for the 22% rate due to companies under common control.

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