Budget: Small firms

Tax simplification ‘a major step’ to keeping business moving

Inver House

Small businesses have welcomed the Chancellor’s promise not to cut the annual investment allowance (AIA) to £25,000 – but they’ll have to wait until the autumn for details.

George Osborne had previously planned to cut the AIA – the amount that companies can invest in equipment, machinery and other expenses before paying tax – at the end of this year.

But Mr Osborne used his Budget speech to promise the allowance would be “more generous than £25,000”.

Andy Willox, the Federation of Small Businesses’ (FSB) Scottish policy convenor, said:  “There’s no doubt that this was a pre-election budget, but it contained some important practical measures.  No matter who triumphs in May, they’ll need to tap the potential of the UK’s small businesses to realise their ambitions.

On scrapping the annual tax return and rates, he said: “We’ve long called for a simpler tax regime for small businesses and the self-employed. Today’s announcements are a welcome step towards developing a practical, modern tax-regime fit for how we do business in the 21st century. The abolition of class 2 national insurance contributions is symbolically important – underlining the increasingly importance of the self-employed.

“Today we’re urging governments in London and Edinburgh to ensure that more devolution doesn’t result in more admin for small businesses. The Scottish Government should also modernise taxes currently devolved and pass the collection of business rates and council tax to Revenue Scotland.  Lastly, ministers in Edinburgh should commit to a business rates review run in parallel to the one launched by the chancellor. Most of the criticisms levelled at the English regime are equally applicable north of the border.”

On fuel, he said: “Every penny spent at the pumps is money not spent elsewhere in the economy. By keeping fuel affordable, the chancellor has helped to keep Scotland’s army of small business owners moving.”

John Allan, national chairman of the FSB, added: “Committing to set the AIA at an appropriate level at the autumn statement will provide the certainty needed for businesses to plan and invest – something badly needed if the UK is to raise its productivity.”

Mr Allan also welcomed the review of business rates in England, which was announced earlier this week, pointing out that it was “long overdue” and that it must be implemented and “not end up as just another report that sits on the shelf”.

The FSB also welcomed plans for a digital tax account – which would mean that five million small businesses will no longer have to file tax returns – and the abolition of class two national insurance contributions for self-employed workers.

Plans to continue the roll-out of “super-fast” broadband were also praised.

John Longworth, director general of the British Chambers of Commerce, added: “The Chancellor avoided the temptation to use newfound windfalls for gimmicks.

“His focus on fiscal responsibility will play well with business audiences.”

Commenting on the plan to scrap end-of-year paper tax returns in favour of real-time digital tax accounts, Phil Charles, head of enterprise for KPMG in Scotland, said: “This should, in theory, prompt cheers up and down the country, with none louder than those coming from the approximately five million self-assessing taxpayers who run their own businesses.

“However, if it’s going to be a truly reduced burden, then information will probably need to be drawn directly from accounting systems.  That’s a massive technological challenge for HMRC to achieve in a relatively short space of time.

“Owner managers have long called for an end to the seemingly endless amount of form-filling and compliance with onerous red tape that typically comes with running your own business. Indeed, our own recent survey of the UK’s small and medium-sized businesses indicates that almost half of all business owners spend at least one day a week on basic administrative tasks.

“Anything which reduces this perceived ‘dead time’, allowing entrepreneurs to focus on the running and growing of their business will ultimately help drive economic growth, spur job creation and increase the competitiveness of the UK.  So we want to see HMRC deliver on Mr Osborne’s ambitions for them.

“The good news is that many small businesses are already embracing innovations in digital technology to support their financial reporting, such as the use of cloud-based accounting services and digital receipt banking, so this should be an easy transition for them.  But will it be as easy for HMRC?”


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