The Chancellor, George Osborne, delivered his Budget today – his last before the May general election. Although it gave him a chance to break the current political stalemate and gain ground over the other political parties, his hands were already tied by his pledge that there would be “No giveaways, no gimmicks”.
This pledge came despite calls from business support groups for the Annual Investment Allowance (AIA) to become permanent so that businesses could invest with confidence. John Longworth, director general of the British Chambers of Commerce said: “Businesses have grown tired of constant chopping and changing in the UK tax system. They need long-term certainty, rather than short-term incentives, to help support investment decisions.
“A long-term investment allowance would give businesses of all sizes much-needed certainty. Our proposals would also allow for premises improvements to be included in the scheme, which are crucial to firms looking to expand their workforce or enhance their efficiency.”
This call was echoed by John Cridland, director-general of the Confederation of British Industry (CBI), who also argued that the AIA should be increased: “A permanent AIA set at £250,000 will get more of our mid-sized companies investing in their factories and production lines, with the UK currently comparing poorly with many key European neighbours, where smaller firms account for half of total business investment.”
Darren Fell, Managing Director of Crunch Accounting, was keen to see measures that would boost the UK’s self-employed business owners: “There's no doubt the self-employed have made the biggest contribution to the UK's economic recovery, but have been largely ignored by policy-makers. Now is the time to change that.
"We recently conducted some research that showed around 2.5 million self-employed business owners will favour parties that have strong policies for freelancers and contractors at the General Election, so legislation that will specifically benefit one-person businesses is very much an election issue. It remains to be seen if the Coalition will realise this before May."
So did the Chancellor listen, and deliver a Budget for business? The main headlines were:
Responding to the Chancellor’s budget, Darren Fell of Crunch Accounting said: "It's been a long time coming but it seems George Osborne is finally recognising the importance of the self-employed workforce to the UK economy. The removal of Class 2 National Insurance contributions is a step in the right direction, and the potential for the removal of the annual Self Assessment tax return is a real coup.”
James Pattison, CEO of Startup Direct, commented: "The simplification of the tax system will be music to the ears of stressed business owners and sole traders, many of whom may now feel more able to handle their own tax affairs and save accountant’s fees.
“However, it’s a shame the Government didn’t go further to boost enterprise and support SMEs, which have been the driving force behind the economic recovery so far. A pledge to fund the creation of co-working spaces for start ups would have been a cost effective way of delivering real, practical help to people wanting to start or grow a business, in an inspiring, efficient and super-collaborative environment. The Chancellor has missed a trick which would have delivered maximum help to entrepreneurs with minimal Government investment.”
The Chancellor of the Exchequer, George Osborne, will announce the 2015 Budget on Wednesday 18 March.
(Updated following the Budget, 18 March 2015)
Throughout the day we will be covering the key points affecting small businesses:
Check this page for Budget 2015 updates and links to news and comments:
The Pensions Regulator (TPR) is in the process of sending out letters to 1.5m small and medium-sized businesses across the UK, letting them know of their automatic enrolment duties, what they have to do next and the date by which they have to comply.
Given that more than 45,000 small businesses will need to set up a pension this year and more than half a million in 2016 – or face heavy fines for not doing so – I’m still amazed by the general lack of awareness when it comes to automatic enrolment. But then again, there hasn’t been a wealth of information for small-business owners.
Auto-enrolment is here to stay and – to date – among larger firms, opt-out rates have been relatively low. In December 2014, the Department for Work and Pensions reported that the five millionth person had joined a workplace pension through auto-enrolment. However, what we have to remember is that this only represents three per cent of businesses in the UK. There are a further 97 per cent to go - more than 1.5 million businesses have yet to comply.
In any small business, time is precious. Owner-managers rarely have the capacity to read journals or attend events – or do anything that distracts them. Getting the automatic enrolment message across to this audience is not easy, but more needs to be done or there is a real danger people will leave it too late or get fined.
I really believe now is the time for the Government to issue specific warnings to small businesses not to put automatic enrolment on the backburner. The messaging needs to highlight that it doesn't need to be complex or boring – two adjectives often used to describe pensions.
Failure to communicate effectively will inevitably result in more businesses putting a pension in place late and getting fined. It will also continue to fuel the confusion around the whole area of automatic enrolment and the benefits it will bring to millions of people not already saving for their future.
Copyright © 2015 Matthew Mitten, director of Enrolsme, provider of auto-enrolment solutions for SMEs.
In April 2014 the Government introduced the National Insurance contributions Employment Allowance. Eligible employers can reduce their National Insurance bill by up to £2,000 a year by claiming Employment Allowance on Class 1 National Insurance contributions, through their payroll software.
Not all employers are eligible, so check your eligibility on the GOV.UK website. If you are eligible, you can claim Employment Allowance through your payroll software. Read more about how to claim on the GOV.UK website.
VAT changed on 1 Jan 2015, so how will it affect your business? Business-to-consumer trades will now be required to charge VAT, at the applicable rate, in the EU country in which the consumer is located, rather than where the seller is located.
The changes have been introduced in an attempt to avoid the distortion of competition and create a level playing field across the EU.
These rules apply to television and radio broadcasting services or other electronically supplied services such as websites and website hosting, downloaded software, downloaded texts, information or images, access to electronic databases, downloaded music, games or films as well as the supply of e-books or electronic publications.
Ordinarily the rules require a (UK) supplier to register for VAT in each EU country in which it makes the affected supplies. To alleviate this burden, alternatively, the supplier can register for a “Mini One Stop Shop” (MOSS) online service, which will enable the UK supplier to account for VAT due in any other EU country by submitting a single MOSS VAT return and the appropriate payment to HMRC in the UK.
Businesses have been able to register to use the MOSS scheme for VAT returns from October 2014 and the online service has been available to use since 1 January 2015.
The Government has stated that it could see an extra £300m in revenue as a result of the recent tax changes.
Without doubt SMEs will be most affected by this new regulation, not least because they have been obliged to implement many changes in a relatively short space of time. As a result, billing management could become much more complex. In addition, their costs may go up in certain countries.
Businesses will be forced to think carefully about where they carry out their operations. The previous scheme encouraged many firms to be based in countries such as Luxembourg, because it charges a lower rate of tax than the UK. The new scheme will revoke this advantage. This means that business owners can no longer reap the benefits of their current location and may choose to move to areas with lower staff costs, for example.
These new rules may also adversely affect costs, so SME owners will need to ask themselves if they can realistically pass this on to their customers. One way to deal with this may be to make the increase very gradual. In this way you may reduce your profits temporarily but are less likely to lose customers in the short term.
Copyright © 2015 Carol Cheesman of Cheesmans Accountants.