Prior to the Autumn Budget, The Federation of Small Businesses (FSB) called on the Chancellor Philip Hammond to make good on his claim that “the Conservative Party is, and always will be, the party of business.”
FSB national chairman Mike Cherry warned that for small business owners, the Budget would be “the Chancellor’s make or break moment.”
“With our small retailers trying to keep their heads above water – and the self-employed community left demoralised by the failure to end Class II NICs – this is the Chancellor’s opportunity to show he really does back business.”
So, what were the FSB’s small business wishes for the budget—and did the Chancellor make any of them come true?
Better benefits and business rates
The FSB Small Business Index (SBI) confidence measure fell to -1.7 across the UK in Q3, with the self-employed (-18.4) and retailers (-42) reporting especially low readings. Small firms were worried about changes to Dividend Allowance, Value Added Tax (VAT) and Insurance Premium Tax (IPT) amid spiralling employment, fuel and compliance costs.
In response to the concerns of its members, the FSB’s Autumn Budget submission called for high street lifelines, including wholesale business rates reform, and better support for the self-employed with an Adoption Allowance, Universal Credit improvements and fresh training incentives.
While securing a Brexit deal is important, he said that the Government should bear in mind that small firms cite the domestic economy as their main barrier to growth.
Business rates:
The FSB called for
- A halt to the annual inflation-linked increase in business rates bills set to take effect from April 2019
- Removal of an anomaly which causes small firms to lose Small Business Rate Relief (SBRR) if they expand into a second premises, even if both locations are modest in size
- Targeted support for struggling high street firms, including a £1,000 business rates discount for small shops, cafes and pubs
The Chancellor announced £900m of business rates support for small businesses on the high street.
“Small businesses on our high streets that cannot get Small Business Rate Relief will be delighted with the significant discount for the next two years, which on average will help these businesses to the tune of almost £2,000 each, but potentially up to around £16,000 off small businesses facing the biggest bills,” commented Mike Cherry.
High street lifelines:
FSB called for
- Increased investment in local roads
- Universal access to 4G broadband
Benefits and support for the self-employed and small businesses:
FSB asked for
- The introduction of a statutory Adoption Allowance
- An extension to the Start-Up Period and reforms to the Minimum Income Floor for sole traders who claim Universal Credit
- Continuation of the New Enterprise Allowance
- Improved access to income protection insurance for the self-employed
- A widening of tax relief on training for sole traders (currently, the self-employed can only claim tax relief on training that increases their existing skill sets, not on training that develops new skills)
- The maintenance of the current Dividend Allowance and VAT registration thresholds and refraining from further increases to the Insurance Premium Tax (IPT), which has risen from 6% to 12% over the past three years
The Chancellor announced a freeze of the current VAT threshold until 2022, crediting the FSB for their campaigning work on this in his speech—a move that Mike Cherry said: “has saved the business community from disaster.”
The Chancellor also announced:
- Protection of the Employment Allowance that will now be focused on small employers, knocking £3,000 off their National Insurance Bill
- A new £10m pilot scheme to fund training for the self-employed, which will be delivered by the FSB
- The extension of important small business creation schemes, including the New Enterprise Allowance and Start-up Loans
- A freeze on fuel duty for the ninth consecutive year—a boon to small businesses using cars and vans in their business
- A loosening of the restrictions on large firms sharing their apprentice levy money with their supply chains, and the burden of apprenticeship training costs for small firms dropped from 10% to 5%
“The decision to protect and refocus the Employment Allowance means that small firms will use the £3,000 of help to increase staff hours, improve pay and meet the rising costs of the National Living Wage, boosting jobs and productivity,” said a delighted Mike Cherry, who also hopes the changes to apprenticeship funding will “go some way to arresting the shocking decline in apprenticeship starts.”
The FSB’s submission also warned that it is impossible to accurately predict the impact of the potential extension of IR35 public sector rule changes to the private sphere—and here, the FSB is less pleased with the news that the extension of IR35 is still to go ahead.
“This must be handled with extreme care, so that lessons are learned and impact assessed from the public sector rollout,” said Mike Cherry.
“This massive expansion of such a difficult and controversial tax regime must not be rushed.”
Summarising the impact of the budget, Mike Cherry called it “the most small-business-friendly budget that this Chancellor has delivered.”
“He has listened to our requests across many areas of tax and public policy, putting him firmly on the side of Britain’s small businesses.”
What issues were important to you before the Budget announcement, and which policies pleased or disappointed you? Do you feel the Chancellor is doing all he can for small businesses like yours?
You can read the full Budget details on the Government’s Budget 2018 page and the policies specifically relating to tax here.
