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State of the Nation

What Did The 2015 Budget Promise For Small Firms?

By March 19, 2015 No Comments
What Did The 2015 Budget Promise For Small Firms?

Parliament-London-UKSay goodbye to your annual tax return. And watch out business rates. In his pre-election Budget on Wednesday, the Chancellor, George Osborne, announced a move to digitise, and streamline annual tax submissions, as well as a review of the deeply unpopular business rate system. These were the headline moves affecting SMEs, and many will be pleased at the prospect of both.

Commentators judged it a supremely political speech, which comes as no surprise so close to the General Election in May. And several groups were given sweeteners in Wednesday’s speech no doubt in the hopes of winning their votes – pensioners, savers, and first-time buyers among them. But what specific changes are the Government proposing to make for small and medium businesses? And what difference will they make to business life if these promises are put into practice?

Tax returns axed

It’s the bane of many self-employed people’s and small business owners’ lives – the annual self-assessment tax return. Days, sometimes weeks of juggling receipts, tackling earnings, and wrestling with expenses take up valuable time, and often cause a great deal of stress. The current paper system will be replaced with real-time online accounts that users fill out using secure codes. By the end of the next parliament, tax information would be submitted digitally, and regularly to avoid a mass of information processing once a year. The Government vows to introduce this change for all UK small businesses early in 2016.

Reviewing business rates

A review of business rates wasn’t new news – it was first flagged up last year as a result of ongoing pressure from business groups to abolish this unpopular, and some would say unfair tax on business premises. But Osborne did admit the current system is out-of-date in an age of e-commerce when so many companies operate online, putting them at an unfair tax advantage over their bricks and mortar peers. Some hope the review will conclude the rates system should be disbanded altogether. Pilots will also be run in Cambridgeshire, Peterborough and possibly in the Manchester area, allowing local councils to keep any business rates growth to invest in local initiatives, and grow local economies.

Cutting corporation tax, freezing fuel duty, and helping pubs

From April, corporation tax will sink to 20 per cent from the current level of 21 per cent, being down overall from 28 per cent in 2010. Meanwhile, fuel duty will be held at the current level to the benefit of British firms – the Government estimates the typical small business with a van will have saved £1,400 by the end of the 2015-2016 financial year as a result of five years of action on fuel duty. Publicans will also win out shortly from a commitment to slash the tax on a pint of beer by a penny from March 23.

National Insurance opt-outs

From April, companies will no longer pay National Insurance contributions for employees under 21 years of age – a saving of £332 per person on average, and affecting 1.5 million young people. The Government is also proposing to abolish Class 2 NI contributions in the next parliament, with a potential impact on about five million self-employed people.

Better infrastructure, and more R&D

The Government plans to go ahead with its commitment to speed up broadband connections, particularly in rural areas, with almost all premises in the UK getting at least 100 Megabits per second under the new, improved system. Moves are also afoot to improve SMEs’ access to research and development (R&D) tax credits, with a two-year publicity campaign encouraging more small businesses to use R&D credits to innovate, and grow. Tech firms in the North of England will be particularly encouraged by £11 million of investment in incubators in Manchester, Leeds and Sheffield. Plus, new enterprise zones will be established around the UK, including in Blackpool and Plymouth.

Greater competition in banking, and business funding

There was a particular focus on fintech companies, and a vow to help them gain better access to banking data to improve the flow of investment to small, innovative firms. It was announced the British Business Bank will select which credit reference agencies and finance platforms will be involved in receiving SME information from banks as part of the long-awaited referral scheme, which we’ve discussed before.

There were various other measures announced that could have an impact on smaller companies.

  • The strengthening of the Prompt Payment Code was confirmed, as mentioned on this blog recently, and the Government vowed greater transparency around its own payment practices.
  • Farmers will be helped by an increase in the period over which they can average out their profits for income tax from two years to five years from April 2016.
  • UK Trade & Investment will receive an extra £7.5 million of funding to boost trade links with China, plus firms in the North of the UK will benefit from a further £3.5 million towards overseas trade and investment missions.
  • The oil and gas industry will be supported with a package of measures, including a new investment allowance, and petroleum revenue tax cuts.
  • The Treasury has also laid out plans to provide SMEs with better education about where and how to gain access to legal services via the Citizens Advice and GREAT business websites.

All in all, there was something for almost everyone in Osborne’s last Budget of this parliament. But the main question is whether the Conservatives will be in power in six weeks’ time to be able to put their pledges into practice. In the meantime, it’ll be business as usual for SMEs until the new Government is decided. But many will be hoping those tax return and business rate promises are delivered whoever is in Number Ten on May 8.

Image courtesy of cameralends / pixabay.com

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