A bill that will help large companies and international competitiveness, but will do little for SMEs, is ICAEW’s verdict on the Finance Bill in parliament last week.
Of course, in the long term, international competitiveness is critical. What the Government is seeking to do with lower Corporation tax (which will fall to 22% in April 2014), with reforms to the Controlled Foreign Companies regime and a new patent box regime to protect UK innovation, and a new patent box regime, is to help businesses choose to locate here – rather than elsewhere in Europe or anywhere else in the world.
This is great for large companies, for multinationals, and for intellectual property.
But it does rather skip over small businesses, which represent 99% of all businesses, which already pay Corporation tax at a lower rate.
Small businesses also need to invest, and they will be affected by the reduction in the annual investment allowance from £100,000 to £25,000, along with the lowering of capital allowance rates announced last year. And the new seed enterprise investment scheme may attract few new investors if it remains as complex as it currently looks.
Here’s some comments small businesses made to ICAEW about the budget:
“Osborne described the budget as budget for economic stability, tax simplification and growth – well, it certainly wasn’t any of that for the Welsh SME market.” – Small firm, Wales.
“We should be asking the Chancellor to reverse his reduction in capital allowances. I think the ICAEW needs to keep on making that representation. I don’t think there is any reason not to do it; it’s not that expensive but it gives manufacturing businesses more of an incentive to invest”. – Small firm, West Midlands.
“Reducing corporation tax is for major companies but they said SMEs were the driver of growth in the economy. It did feel like it was a Budget for big businesses not small businesses. The tax cuts are about being more attractive here than in Holland or Luxembourg.” – Manufacturing company FD, West Midlands.
“Most frequent comments: No Employer’s NIC relief for new employees; reduction in Capital Allowances when we need investment in business. The modest initial allowances benefitted smaller companies most. CT rate is tinkering really: if you feel the benefit of that reduction you’re already dealing in big numbers and making big profits – not in need of help.” – Strategy board, North of England.
Small businesses today are tomorrow’s Dysons and Microsofts, and we think they need Government support as much if not more than the big businesses that have already made it.