Call for Budget to back small businesses

Representative group, the Federation of Small Business has called for the forthcoming Budget to back enterprise, reform business rates and simplify taxes.

In its submission to the Chancellor of the Exchequer in advance of the 2016 Spring Budget Statement (Wednesday, March 16) the FSB called on the Government to strengthen small business confidence by clearly and consistently backing enterprise. The FSB's recent quarterly survey shows small business confidence is cooling in the face of deteriorating global economic headwinds and domestic policy decisions which are coming into force.

The group claimed that its members are being tested by a series of significant challenges which will drive up costs and increase burdens over the coming months. These include the introduction of the National Living Wage in April, pension auto-enrolment and changes to the tax treatment of dividends. On top of these, small firms still face an unreformed business rates system and the prospect of compulsory quarterly digital tax reporting.

Business confidence

Three weeks ago, the Chancellor spoke to FSB members at our Policy Conference stating he would back small business. FSB calls on the Chancellor to use his Budget to do just that – to boost business confidence, to deliver fundamental reform of business rates and to simplify the tax system.

Mike Cherry, Policy Director for the FSB, said: "In the face of a number of emerging global and domestic pressures, small businesses are looking to the Chancellor to back them through what are set to be challenging times ahead. Many are struggling to get to grips with the cumulative impact of a series of new tax and regulatory changes that are due to hit their business.

"In this climate, it's crucial that the Chancellor uses the Budget to reassure small firms and boost their confidence so that they invest, create jobs and drive economic growth. This means no new major challenges that drive up costs and burdens. In addition, Mr Osborne must deliver on his promises to overhaul the business rates regime and simplify the tax system."

Tax simplifications

The small business community is still keenly awaiting the findings from the Office for Tax Simplification (OTS) review of small company taxation. The FSB said that it supports this work and has itself commissioned research to deliver a series of ambitious options for policymakers.

Each would result in a far simpler, more user-friendly and 'tax-payer centric' system than at present. Together they draw on the insight that if designed optimally, will reduce costs to businesses and Government. One option the FSB proposes is to create a simplified small business tax regime centred on a single tax payment. This would provide a proxy of a business's overall tax liability, essentially combining many taxes into one and therefore removing the complexity of applying a number of different taxes, as is the case under the current system.

Mike Cherry said: "Simplifying business taxation must now be a major priority for policymakers and we call on the Government to take a bold approach. The current tax system for small businesses remains overly complex, bureaucratic and hard for businesses to navigate. Many feel either forced to pay for expensive tax advice or run the risk of failing to comply. Tax administration is often cited by our members as a major burden on their businesses and acts as an unnecessary brake on economic growth and job creation."

In order for the Government to succeed with its "Making Tax Digital" agenda, tax data must be accurate and businesses need to be confident they have provided the right information online. This must go hand-in-hand with a simplified system in order for digital reform to achieve its aim of lowering costs for taxpayers and businesses. Streamlining the system will achieve the Government's aims of saving tax costs, increasing receipts and reducing errors.

Supporting growing businesses and new entrepreneurs

On supporting new entrepreneurs, the FSB welcomed the recently published independent review of self-employment in the UK and encouraged the Government to take on board its recommendations. In particular, FSB is keen to see improvement to maternity pay and access to more flexible finance solutions such as mortgages and pensions for the self-employed.

Mike Cherry said: "FSB supports the Chancellor's efforts to repair the public finances. But this must go hand-in-hand with a policy environment that facilitates and rewards wealth creation. Our members are seeking reassurance that no additional tax burdens are introduced and that the Government continues its push on deregulation, in order to reduce the cost of doing business."