Nine Budget Boosters for Small Business & Entrepreneurs

It’s safe to say this month’s budget was rather overshadowed by Ian Duncan Smith’s spectacular resignation and subsequent government retraction over proposed disability cuts. However, there was some seriously interesting stuff in it for small businesses that I think got rather overlooked.

Bear in mind that Osborne’s budget (and everything most politicians do right now) is most probably dictated and influenced by their stance on the upcoming referendum on Europe, but this was clearly a budget designed to encourage independent small business – as that demographic is seen by the government as critical to the success of a ‘remain’ vote. Small businesses were even labelled the ‘clear winners’ of the budget, so let’s see what rewards have been reaped in the battle to win over SME’s hearts and minds…

Here are the Chancellor’s 9 budget boosters for small business.

Business rate relief – the threshold has been more than doubled from £6,000 to £15,000 for small business rate relief, while the higher rate has increased from £18,000 to £51,000. This will take many small businesses – they reckon over 600,000 – out of the system altogether and could mean your business pays no business rates at all, or at least significantly less – around £6,000/year. Osborne also added that in the future, business rates increases will be based on CPI rather than RPI, which should provide more realistic rates bills for retailers.

Self-employed NICs – from April 2018 class 2 National Insurance Contributions will be abolished for the self-employed, meaning you will only pay one type of National Insurance (Class 4 NICs) for profit of £5,965 or over per annum.

Income Tax threshold – from 2017 the threshold for paying income tax will be raised from £11,000 to £11,500, while the higher rate will also be raised from £43,000 to £45,000 for the 2017/2018 tax year.

Corporation tax – is to be cut from 20% currently to 17% by April 2020, in theory benefitting around 1 million companies according to the Treasury.

Entrepreneurs’ Relief Extension – An extra £10m has been added to the existing limit to encourage investors to back unlisted companies.

Capital gains tax – The reduction of capital gains from 28% to 20% and the basic rate cut from 18% to 10% will affect the sale of equity in businesses only (so not residential sales) and will apply from the start of the new tax year next month (April 2016).

Commercial Stamp duty – The chancellor has abolished stamp duty on commercial property sales up to £150,000 value, then set simple new bands of 2% on sales from £150,000 – £250,000 and 5% thereafter.

Sharing economy businesses – to try and keep up with the times, two new tax free allowances worth a combined £1,000 have been created for income on property you own and trade conducted through online sharing platforms.

Online equality – overseas retailers will no longer be able to store stock in the UK and sell online without paying VAT.

While these measures were widely welcomed by small business and entrepreneur representatives, it’s worth noting that in last autumn’s statement Osborne & the government announced cuts of 17% to the Department of Business, Innovation and Skills, as well as the surprise axing of the Business Growth Service – including the Growth Accelerator programme which helped an estimated 18,000 small businesses to raise over £100 million of finance.

Now they plan to pay for these budget boosters by cracking down on big firms and their flexible tax reduction practices such as offsetting debt interest against profits and using losses in one year to offset profits in another.

So let’s just hope Osborne and his team manage to do this more successfully than they have done to date, and that small businesses can finally reap the rewards of long overdue measures to help level the playing field.

 

WrightCFO Ltd is a Finance Director Consultancy for SMEs. If you think your business might benefit from an outsourced part-time FD, please get in touch.

sophie@wrightcfo.co.uk

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HMRC under fire…and we need to keep the heat on high

It’s fair to say HMRC have had a pretty bad start to the year. Google-gate coincided with the end of the tax year underlining their eye-wateringly low effective tax rate of 3%, while millions of normal taxpayers looked on in disbelief with nothing short of envy, frustration and anger.

The unfairness of it all is made worse by the Chancellor’s proposals to ‘simplify’ tax by making businesses file mini-returns quarterly.

What’s the issue?

So for anyone who’s missed what this is all about – it’s part of the HMRC’s strategy to Make Tax Digital – a revamping and overhaul of the current antiquated system, that’s supposed to take tax reporting and collection into the 21st century. The controversial proposal to make returns quarterly hit the news again this year after it was first mooted at the in the 2015 Spending Review and was discussed in parliament on 25 January after a petition against them got over 107,000 signatures.

Whilst the general idea of updating our antiquated tax system and Making Tax Digital seems sensible and I can see the benefits of encouraging those businesses who are not yet online to go digital, we need to be careful that the changes benefit not just the HMRC but business too.

The furore over the quarterly tax return, as it was dubbed, is a prime example. In a world where we already have excessive red tape, deadlines and requirements for business management processes, to make deadlines quarterly, rather than annually, can only make more work not less.

What they say?

HMRC argued that it was not proposing a quarterly tax return, that the updates would: “reduce the burden and cost to business of keeping their tax affairs up-to-date and make it easier to spot mistakes. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send.”

Hmm, I’m not so sure

But I – and over 100,000 others – simply don’t buy this HMRC line that it will be a quick press of a button to essentially download information that already exists. Figures will have to be prepared, mini audits conducted and man hours spent collating this information and reporting it in the required format.

Filing even mini returns or HMRC-worthy financial updates four times a year may be useful for the HMRC and help streamline their operation but it will be more work for small businesses, and especially for those who outsource all their accounting, it will also undoubtedly be more expensive.

At least the HMRC plan on introducing these reforms gradually after lengthy discussions and consultations – and this makes scrutiny even more relevant and important.

The quarterly tax return uproar and the row over Google & pals’ arrangements are vital to hold the government and HMRC to account. We need to make sure that the reforms which arise work for everyone not just ease the Revenue’s workload management or help big business pay less tax.

SMEs need to keep the heat on and make our voices heard.

 

https://petition.parliament.uk/petitions/115895

 

http://www.wrightcfo.co.uk

sophie@wrightcfo.co.uk