Barclays to hike up SME lending by 10%
Tuesday, January 12, 2010, 03:44
Barclays bank has committed to adding an extra £1.5bn to lending balances bringing the total to £16.5bn by the end of 2009. The money includes £300m from the new European Investment Bank Scheme.
The bank also revealed that all UK small businesses, whether or not they are a Barclays customer, will be able to access its CreditFocus service, which allows entrepreneurs to check the credit worthiness of customers or suppliers.
In addition, Steve Cooper, Barclay's managing director of local business, said in January the company will begin promoting the Small Business Finance Scheme, an initiative unveiled as part of November's pre-budget report.
Through the scheme, loans of between £1,000 and £1m will be available.
Taxman offers green incentive for company cars
Tuesday, January 12, 2010, 03:42
Organisations that choose cleaner vehicles will now be improving their balance sheet as well as their corporate social responsibility (CSR) credentials. The Energy Saving Trust estimates that British businesses could save £2.6bn by switching to greener fleets.
However, the changes announced in the last budget also represented another key government agenda - reducing red tape. The chancellor has responded to calls from business organisations to simplify company car accounting.
Capital allowances for cars
The current capital allowance scheme for business cars is being scrapped in favour of an all-new system for new cars registered from 1 April 2009.
Capital allowances allow companies to offset the cost of items used for their business against their tax bill. The changes will affect companies who buy vehicles outright and fleets that lease their company cars.
Currently, capital allowances on company cars work in two ways, with vehicles under £12,000 written down in a general pool, at 25% on a reducing basis. Those of £12,000 and over are treated individually and their annual writing down allowance is capped at £3,000. However, for these cars a balancing adjustment can be made in the year of disposal. This effectively means that full tax-relief is given for any depreciation suffered during the period of ownership.
Firms leasing cars can claim the full cost of leasing against tax for cars costing up to £12,000. After this, the proportion of the rental cost that can be claimed falls as the value of the car increases. For example, a company can claim 80% of the rental cost of a £20,000 car, but only 75% of the rental cost of a £24,000 one. This is called the lease rental restriction (LRR).
The emissions incentive
From April 2009, a CO2 emissions threshold of 160g/km replaces the £12,000 'expensive car' benchmark used at present. This emissions-based breakpoint will be used to encourage businesses to choose cleaner cars.
Cars registered from 1 April next year with CO2 emissions above 160g/km will enter a new depreciation pool and receive a 10% writing down allowance, while those at or below 160g/km will sit in the general 20% pool. In effect this means that organisations buying a vehicle emitting 160g/km or below outright will be able to offset twice as much of the cost of its depreciation against their corporation tax bill. The creation of the 10% reducing balance pool means that there will be no balancing adjustment available for any cars, regardless of their emissions.
There is an even greater incentive for firms able to operate cars that emit less than 110g/km of CO2. The government has said that, until 2013, it will allow companies to write off the full cost of these cars in the first year.
The government has decided to eliminate the LRR for cleaner cars, meaning that from next April, companies will be able to offset 100% of their leasing payments against their tax bill if a vehicle is below the 160g/km threshold, irrespective of its capital cost.
The LRR will remain for cars emitting more than this threshold but will be fixed at a standard rate of 15%, meaning organisations will only be able to claim 85% of the financial element of their rental.
The big picture
It is clear that the tax changes coming into effect from next April will have a major impact on nearly every corporate fleet. The partial abolition and simplification of the lease rental restriction, which the BVRLA has long argued for, makes leasing a car below 160 g/km cheaper in all cases. Meanwhile, the new 15% restriction for all vehicles over 160 g/km could actually make some top-end executive cars cheaper to lease as well.
However, tax is just part of the whole life costs of a car fleet (others include depreciation, running costs and financing) and any organisation should always endeavour to get some professional advice or use modelling software to determine whether they should buy or lease company cars and which models they should offer.
This last point has become critical now that emissions play such a key role in the tax equation. Two cars that look alike and have a similar list price could have a significantly different total cost of ownership due to what comes out of the tailpipe. A difference of just 1g/km could mean many hundreds of pounds difference - for each car.
Interest rates cut to 2%
Tuesday, January 12, 2010, 03:40
The Bank of England has shaved another 1% off the cost of borrowing bringing interest rates down to 2%, the lowest level since 1951.
The move, which was predicted by many analysts, was welcomed by experts as providing the kickstart the economy needs.
John Wright, national chairman of the Federation of Small Businesses, said the rate cut was "historic" and sent a message to banks to increase lending to small businesses. "One in three of our members are still reporting trouble accessing finance so this move is very welcome," he added. "The burden is now on the banks to pass this cut on to their customers. This cut will provide a welcome piece of mistletoe to give a kiss of life to the economy when it needs it most."
The Confederation of British Industry (CBI) agreed saying that while the cut was significant it was "critical" the reduction is passed onto businesses and consumers. "The economy is stalling, inflation is expected to undershoot the Bank's own target and the headline RPI rate of inflation is likely to turn negative for at least a few months in 2009," said Ian McCafferty, CBI chief economic adviser. "We need to see lending improve and to keep business working." The UK is one of several countries which have today cut interest rates in a bid to deal the economic downturn. Rates in Indonesia were slashed to 9.25%, the first cut for a year; New Zealand's central bank reduced the cost of borrowing by a record 1.5% to 5% and in Sweden an "emergency" cut has reduced rates by 1.75% to 2%.
