Travel has had a lucky escape in today’s emergency budget announced by Chancellor of the Exchequer George Osborne.
The sector will be negatively affected by a lack of change in Air Passenger Duty, an increase in VAT and further likely redundancies in the public sector.
However, small and medium sized companies will be pleased by a number of tax and National Insurance cuts and exemptions while a reversal of the decision to repeal the Furnished Holiday Lettings tax exemptions will also boost the domestic sector.
No announcement was made on the proposals to change APD to a per plane tax were made. Although concerns had arisen that any such change could lead to higher overall tax rates, the lack of any announced changes means the planned substantial rises in APD for November will go ahead.
The chancellor said there would be an increase in VAT from 17.5% to 20% as of January 4 2011, which will see the cost of holidays rise.
Budgetary cuts of 25% in virtually all governmental departments and a national freeze on council tax next year should also cause further job losses among public sector workers although it is difficult to predict what the extent of the losses will be.
Luxury travel providers may also be concerned at the increase in capital gains tax from 18% to 28% for higher rate tax payers, although this is not as steep an increase as the 40% suggested before Osborne’s speech.
However, there was good news for small companies as the announced reduction of small business corporation tax rates to 20% next year should lead to a boost in profits for as many as 850,000 companies.
Reductions in National Insurance on the lowest paid should further help small companies while the decision to exempt new companies set up in the regions, excluding the south east and the east, from the first £5,000 of National Insurance per employee for up to !0 members of staff should also drive corporate innovation.
An annual 1 percentage point cut in the corporation tax rate from 28% currently to 24% within four years should also boost the coffers of larger companies.