FOR IMMEDIATE RELEASE
Forum was “distinctly underwhelmed” by the Budget
In order for the national debt to reduce over this parliament businesses need to grow and invest with confidence, but the Forum of Private Business is concerned that the Budget did not offer enough for the UK’s 1.2 million SME employers to grow and invest in their business.
Ian Cass, Managing Director of the Forum, states “the Chancellor began his opening statement on the Summer Budget talking about business confidence stating that he wanted to encourage businesses to invest, grow and hire. With this in mind the Forum is distinctly underwhelmed by the Budget as it raises too many concerns for our members to be able to invest, hire new employees and drive economic growth. There was little in the Chancellor's statement to directly address the impact of compliance and red tape on SME's".
Changes on how dividends are taxed may, in effect, be a tax on success as small business owners, who pay themselves last, are left with a tax bill when they finally reward themselves for good company performance.
This was also the only tax simplification measure outlined in the Budget (although there are a number of reviews due), despite the fact that employers spend an average of £2,900 on tax specialists to ensure compliance and have had to increase the amount of time they spend on payroll to take into account additional complications from the EU and Westminster. The green paper of pensions also limits the confidence of the UK’s smaller firms as they prepare for auto-enrolment deadlines by suggesting that they will have to become experts in this field.
Confidence to invest may also be dampened by increased costs to the National Minimum Wage (NMW). Despite the fact that most members pay above NMW, many wage structures are indirectly affected and may make it harder for businesses in labour intensive industries such as social care (where budgets are being cut) and those businesses that have overseas competition. Setting the Annual Investment Allowance at £200,000, which was lower than anticipated, was still however welcome as it gives SMEs some stability and the proposed increase in wages were mitigated by the reduction in corporation tax and an increase in the employment allowance to £3,000.
Ian, speaking from experience as an owner of a micro business, argued that "the increase in National Minimum Wage (and the accompanying differentials within firms) will be difficult for a large number of SMEs to pass on to clients. The biggest issue may however turn out to be the changes in terms of how dividends are taxed as many small business owners pay themselves very little, using a dividend as their reward when the company performance justifies it.”
The Forum’s wish-list did include increased investment in HMRC, but this was mainly to tackle corporate tax avoidance schemes and answer the phones. If the money is used to punish small firms to raise revenue then this will further cripple businesses who want to grow their business.
Increases in the number of enterprise zones and greater local autonomy are welcomed as long as this is combined with radical changes to how commercial property is taxed following the ongoing business rate review.
The Budget has also hit one-man-bands hard, particularly those that are ambitious and looking to grow in the next few years – as these firms are 74% of the business population this cannot do anything but impact on growth.
Ian Cass concluded “SMEs created 65% of employment in the last recovery and are likely to do so again if the conditions are right, so it is hard to see why this budget would encourage these businesses to invest and employ in the short term. We have been left with more questions than answers and hope that the plan for productivity deals with the biggest millstone around the neck of an employer, red tape.”
Representing thousands of small businesses across the UK – including retail, service providers and manufacturing companies – the Forum is recognised by the Government as one of the six main business support and lobby groups. It uses this position to influence decision-makers in the UK and Brussels on the issues that matter to small businesses.
For more information, visit www.fpb.org or call 0845 130 1722.
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02 Nov 2017 14:00
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