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Pre-budget report strikes delicate balance to help SME businesses.

The UK and Ireland arm of global accountancy association MGI have welcomed the announcements in a clearly political pre-budget report aimed at helping the country’s fragile economic state.

The Chancellor, Alistair Darling, announced he was giving small and medium-sized enterprises (SMEs) a helping hand with the news that a rise in corporation tax in 2010 is to be postponed for at least a year.

The Enterprise Finance Guarantee scheme, which provides bank loans to small businesses, has been extended for a further year, while HMRC’s ‘Time to Pay’ scheme – allowing businesses to defer tax payments - has been extended for “as long as it is needed”.

And the commercial property sector has been given a boost with news that empty business properties with a rateable value of less than £18,000 will be exempt from tax.

However, the predicted return of the 17.5 % VAT rate is forecast to be an administrative headache for many businesses and retailers, and National Insurance contributions (NICs) are set to rise by a further 0.5% in 2011.

Paul Winder, CEO of MGI UK and Ireland, said: “This pre-budget report is generally giving businesses some crumbs of good news in a year when there have been very few.

“We are pleased to see anything that will help businesses improve their cash flow because this has been a major issue for most of the SME businesses we deal with.

“Unfortunately the rise in VAT, although expected, may cause teething problems for businesses in the New Year, but there has been assurance that the rates won’t go above 17.5% in the near future.”

Inheritance tax is to be frozen at £325,000 until 2011 and the stamp duty holiday will end on 1 January, with the threshold returning to the £125,000 mark. Contributions to public sector pensions will be cut by £1bn a year and shoppers may be hit by the rise in VAT.

High-earning tax payers will be hit hard as the threshold at which people start paying tax at 40% moves to £43,875 from April 2010, and the top rate of tax for people earning more than £150,000 will rise to 50% as of April next year.

Paul added: “With the state of the country’s finances there were never going to be any big giveaways from a tax point of view, so individuals affected by the changes now need to take a look at how their finances are arranged to take advantage of any benefits that can be found.”