Issue date: Wednesday 16 March 2016

Chancellor’s Budget backs small business

Responding to Chancellor George Osborne’s 2016 Budget speech, Mike Cherry, Policy Director at the Federation of Small Businesses, said:

“In a Budget constrained by both the need to reduce the deficit and the economic outlook, the Chancellor has listened to our calls for the tax system to be made simpler for small businesses and the self-employed and taken important action on business rates. 

“In particular, our members have campaigned hard to make Small Business Rates Relief permanent, and expand it – and the Chancellor has heeded our calls, taking many small firms out of the system altogether. The combined measures announced on business rates – the single biggest tax cut in today’s Budget – will be viewed by our members as a welcome and important step on the road to fundamental reform. In addition, online retailers will benefit from steps to secure a level playing field for smaller online businesses on VAT.

Business rates
FSB have long been calling for fundamental reform of business rates – an unfair tax which takes no account of how businesses are actually performing. Small Business Rates Relief (SBRR) is an important lever to protect the smallest firms from higher rates bills. We have consistently called on the Chancellor to make the temporary doubling of SBRR permanent and so are very pleased to hear today’s announcement. This will see firms with a rateable value of less than £12,000 paying no business rates at all, with further assistance provided to those with a rateable value of under £51,000. We outlined a similar plan in our own submission and so this represents a significant win for FSB.

The change in the way business rates are adjusted by using the CPI as opposed to RPI measure of inflation will be a welcome boost to ratepayers, as will the move to revaluations every three years. The proposal to explore moving from SBRR to a property-based allowance, as suggested in our submission, would be a positive step to further fundamental reform of this regime – and we look forward to working with Government and HMRC in taking this idea forward.

Small Business Taxation
Business fully supports the Government’s aims to make the UK the most competitive business tax location in the world. The decision to further lower corporation tax to 17% in April 2020 is an important statement of intent and will provide a boost for affected firms.

The Chancellor has also sought to reward enterprise by extending entrepreneurs relief to external investors in unlisted companies, while start-ups and expanding businesses will be helped by cuts to commercial stamp duty. This budget also provided much needed support for online retailers by clamping down on VAT avoidance by overseas firms, which should help to create a level playing field.

Additional resource for HMRC to create a seven day a week service and a dedicated line for small businesses and the self-employed is welcome, as is the plan for every small business to have a named agent to deal with. Our members have expressed concern about HMRC’s poor communications so more needs to be done to reassure and convince small businesses that services will significantly improve. It’s especially important that HMRC is accessible and provides appropriate support particularly at a time when Government is proposing to introduce mandatory quarterly tax reporting, which will be extremely challenging for many small firms.

Fuel duty 
Freezing fuel duty at its current rate is a key ask from FSB members. It will provide a significant boost to small business confidence and stability and will be universally welcomed by our members. In recent research, 93% of small firms said cars are important to their business. Businesses across the country are heavily reliant on roads for customers, staff, and suppliers, and affordable fuel is a lifeline to those in rural areas.

Infrastructure
FSB has long called for improvements to transport links across the North, which are vital for small business growth across the region. Recent FSB research shows well over a third (37%) of small businesses in the North see inter-city transport as a top priority. It’s good to see Government has taken this on board, and committed to funding both a new High Speed 3 (HS3) network and further road investment.

In addition, we welcome the commitment to press ahead with Crossrail 2 in London. As transport in London nears full capacity, new routes are critical to keep the capital moving. It’s now imperative that these major transport projects are delivered on as quickly as possible.

Devolution
The latest round of devolution deals announced today by the Chancellor in areas including East Anglia, West of England and Greater Lincolnshire will provide important additional powers for local leaders to drive economic growth in their regions. Plans to give London a 100% retention of business rates will also be welcomed by local businesses in the capital.

As Local Enterprise Partnerships (LEPs) will be centrally involved in supporting newly empowered local leaders, it is crucial that the voice of small business is represented. We applaud the announcement of a dedicated small business representative on each LEP Board, a recommendation that FSB has made to Ministers strongly over the last year.

Supporting saving for the self-employed
The introduction of a new lifetime ISA for savers will be particularly beneficial for the self-employed. The Chancellor has recognised that this is a group which traditionally has lower forms of savings for a rainy day and is also less likely to be saving into a pension.

Flood insurance
FSB welcomes the additional £700m of support for flood defences and the increase of maintenance spending by £40m a year. We particularly welcome the announcement of new flood defence schemes in Leeds, York, Calder Valley, Carlisle and wider Cumbria, areas that were particularly hard hit by the recent flood events.

However, we note that the increase in flood defence spending will be paid for by an increase in insurance premium tax. While we welcome the fact that this was a smaller increase (0.5%) than expected, it is a tax on those living in the floodplain and could put additional pressure on those businesses that already struggle to find affordable flood insurance. This reinforces the need for Government and industry to provide affordable flood insurance for small firms who will be excluded from Flood Re when it comes in next month.

Severn Crossings Toll
The 50% reduction in the Severn Crossings tolls announced by the Chancellor will provide an important boost to small firms in Wales and the West of England. A wide variety of our member businesses regularly use the Severn Crossings, and a study from the Welsh Government suggests that the tolls cost more than £100m each year in lost trade. This cut will have a positive impact on many small businesses, reducing the cost of trading across the Welsh border, and boosting confidence among small firms both sides of the border.