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25 October 2018

Autumn Budget will define Chancellor’s legacy, say small firms

Ahead of the Chancellor’s 2018 Autumn Budget statement on Monday, Federation of Small Businesses (FSB) National Chairman Mike Cherry said:

“This Budget is a make or break moment for the Chancellor: one that will define his legacy within the small business community. Questions have been raised about this Government’s commitment to sole traders and small firms. Monday is its chance to set the record straight. With the public finances in good shape – thanks in no small part to rising corporation tax receipts – it can afford to do so.

Value Added Tax (VAT) is the most time-consuming levy for small business owners to manage. A small registered firm loses six working days a year to VAT compliance on average, draining their productivity.

"Speculation about a drop in the £85,000 turnover threshold for registration is very concerning. Suddenly dragging more small firms into the VAT regime would be incredibly damaging, placing a huge admin burden on thousands of businesses and bringing them into the scope of Making Tax Digital by stealth.

“The Chancellor should maintain the current VAT registration threshold until 2022. At the same time he should consider a smoothing mechanism – as recommended by the Office for Tax Simplification – to address the issue of small firms bunching around the £80,000 turnover mark. Doing so would incentivise small business growth rather than stifle it.

“Small businesses on our high streets are battling for survival amid spiralling costs. They urgently need support, starting with reform of a regressive business rates system which has failed to keep pace with the times. Only one in eight small firms in England currently claim full small business rates relief. More need to be brought into the fold.

“Because of a confusing cap system, small business owners who saw their rates bills drop last April are realising savings very slowly. For some retailers, a lower rates bill – when it eventually does manifest itself – will be too little too late. The proceeds of any new digital services tax need to be directed to small retailers. These businesses are reliable contributors to the Treasury. More than that, they are vital contributors our local communities.

Universal Credit (UC) is failing our self-employed community. Using the Minimum Income Floor to dictate UC entitlement for sole traders punishes those with fluctuating incomes, causing them to lose out to the tune of thousands compared to employees earning the same amount. The system must be reformed to support those with changing pay packets. Equally, the UC start-up period must be extended to give budding business owners a chance to get their firms off the ground.

“The Employment Allowance is a vital incentive which has helped more than a million small firms create jobs, increase pay and grow over the last year alone. There is a strong case for reforming the allowance – uprating it, and directing it towards the small businesses where it has a meaningful impact. £3,000 off your National Insurance bill makes a massive difference if you’re a micro business trying to expand.”