Mixed bag for SMEs in Autumn Statement » SMEInsider

Mixed bag for SMEs in Autumn Statement

Downing Street

Yesterday’s Autumn statement delivered a mixed bag for small buisnesses. For some the news was welcome – the cuts to business rates that amount to around a £6.7bn saving were described as offering crucial support to small businesses by the FSB. However, the decision to abolish the VAT flat rate scheme drew sharp criticism.

FSB executive chair Mike Cherry said the business rates move would “Take 600,000 small firms out of the rates system altogether and will mean lower bills for many thousands more.

“FSB has campaigned on this issue for many years and we are delighted that from April 1st next year small businesses will start to benefit. We are particularly pleased to see that the Government listened to our calls to give rural businesses 100% relief on rates.

“Our members in London are facing huge increases in their rates bills in the wake of the recent revaluation. We still want Government to look again at increasing relief thresholds in the capital as the next major reform of the business rates system.”

 

VAT changes unwelcome

However, the news that the VAT flat rate regime was to be abolished caused consternation. Cherry said: “Many small businesses rely on the optional VAT flat rate scheme to simplify the management of their tax affairs.

“We welcome the government’s attempts to clamp down on any misuse of this scheme by a small minority of businesses that use it. However we would be concerned if any small businesses who play by the rules now end up having to pay more to remain within the scheme.

“Following these reforms, it is important HMRC now produces clear guidance so that small firms understand whether or not to join the scheme.”

Ed Molyneux, CEO and co-founder of FreeAgent – who provide cloud accounting software for freelancers, micro-businesses and their accountants – agreed that he decision to shut down the supposedly-inappropriate use of the VAT Flat Rate Scheme by introducing a new 16.5% rate from 1 April 2017 for “Businesses with limited costs, such as many labour-only businesses’, is likely to be detrimental for many contractors across the UK. It will essentially mean an increase in the amount of VAT that those businesses have to pay.”

 

‘A shock’

Emma Jones of Enterprise Nation was similarly critical of the move. “For the past decade I’ve spent every living day working with small business owners and the self-employed. I can say, hand on heart, this is a community of people that is nothing but well intentioned. It’s made up of employees who take a risk to go it alone having spotted a gap in the market, and hard-working individuals who take a risk in making the next step of hiring, exporting and innovating. These are business owners who pay their taxes and commit every day to making their business better – and in turn improve their local economy and community.

“Which is why it was such a shock to see our Chancellor stand today in Parliament and associate the self-employed with avoiding tax. The ‘inappropriate use’ of a VAT flat rate scheme introduced to help small businesses is being shut down. And a move to ‘remove the benefits of disguised earnings of the self-employed’ was hailed as a route to generate £630m for HM Treasury.”

 

‘Productivity improvements are key’

Meanwhile the ICAEW welcomed the emphasis on infrastructure and productivity improvements. The Institute’s head of enterprise Clive Lewis said “Investment in transport and faster broadband are vital. Mr Hammond was right to stress the importance of developing the regions, such as the Midland Engine, as part of the process of re-balancing the economy and spreading prosperity beyond London and the South East.

We believe firmly in the importance of boosting Britain’s international trade and I am pleased to hear the Chancellor has doubled the budget for export finance. We are disappointed, however, that he has not adopted the idea of incentivising SMEs to export by announcing tax incentives or a voucher scheme for companies researching and developing overseas markets.

However did point out that additional taxes on employers through National Insurance, coupled with rises to the living wage and some of the Chancellor’s other measures suggest this statement “Will not be particularly well-received by some small businesses.”

 

 

 

 

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