Division over tax

Ditch super deduction and help small firms, says FSB chair

Martin McTague, FSB chairman
Martin McTague: turning point

New national chairman of the Federation of Small Businesses Martin McTague says the Chancellor should ignore calls to extend the super deduction tax break and provide more help for small firms.

CBI director general Tony Danker last month said making the 100% tax break permanent could boost UK business investment by up to £40 billion a year by 2026.

But in his first big statement since taking the chair at the FSB, Mr McTague said the Treasury should move away from the “eye-wateringly expensive” super deduction tax break which “will primarily be used by corporations and multinationals, not small businesses.

Instead, he says Chancellor Rishi Sunak should prioritise reduction of Government-imposed overheads to free up funds for investment at the local level.

FSB research shows that just 4% of the small businesses that make up 99% of the private sector see the super deduction as one of the top three incentives to invest.   

He wants to see an increase in the Employment Allowance to £5,000, an extension of business rates relief [in England] and more support for rising energy costs.   

Rishi Sunak delivering his Mais lecture on taxes

He also wants to expand and make permanent a statutory sick pay rebate for small firms and simplification of the R&D tax credit system to make it more accessible for small businesses without having to use paid intermediaries.    

In a letter to the Chancellor, Mr McTague calls for next week’s Spring Statement (23 March) to tackle surging operating costs, supply chain disruption and labour shortages which are making it increasingly difficult for firms to invest and expand.  

His comments follow a pledge from the Chancellor last month to create “a new culture of enterprise”. In his Mais lecture, Mr Sunak stated that he “firmly believe[s] in lower taxes”, adding that “the marginal pound our country produces is far better spent by individuals and businesses than government.” 

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Mr Sunak is being urged to cancel or postpone an £18bn annual increase in national insurance contributions (NICs) and dividend taxation amid speculation that the Treasury may scrap the R&D tax credit incentive for small research-intensive businesses in favour of supporting larger companies.  

The FSB’s letter follows publication of the ONS’s latest Business Insights study, which finds that 5% of business owners “have low or no confidence of surviving the next three months”. The latest BEIS statistics show that there are 5.6 million firms across the UK, indicating 280,000 are at imminent risk of collapse. 

A quarter (25%) of enterprises in the hard-hit accommodation & food services sector are still not fully trading, according to the ONS, and the majority of firms are concerned about performance over the coming month: “the top two concerns were inflation of goods and services prices (21%) and energy prices (15%).”  

Mr McTague said: “When we look back at this tumultuous period, next week’s Spring Statement will, for better or worse, be seen as a turning point. 

“The Chancellor has a choice: plough on with damaging tax hikes, or take steps to protect the most fragile and empower small firms to deliver his ‘culture of enterprise’ vision. 

“He rightly talks about the need to invest in capital, people and ideas. However, that investment cannot happen so long as surging operating costs are depleting cash reserves and disposable incomes. Pulling the rug from under small research-intensive firms with the removal of incentives would make a bad situation worse. 

“The time to deliver a low tax, high investment, dynamic economy is now, not later in the political cycle. The Chancellor cannot control the wholesale price of gas and oil, but he can control tax policy.” 

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