The new accounting rules will impact professional services firms and tradesmen. Because the new accounting rules relating to short-term contracts could result in a high one off tax charge the treasury is expected to introduce spreading relief to reduce the impact.

Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants, said he expected the treasury to give small and medium size companies the ability to spread the extra tax charge over three to five years.

Accountancy representatives and the Law Society have lobbied Gordon Brown, the Chancellor, to spread the tax charge over 10 years.

It warned the Treasury that many businesses would struggle even with a 10-year spreading, and that anything shorter than that will see a lot of small businesses folding.

A survey of their members, conducted by the Treasury found that 25% of small businesses faced an increase in their tax bill of more than 50%.

A further 17% of businesses faced a tax bill that will more than double.

David
Small Business Resource