Yesterday’s Autumn Statement saw the chancellor announce a mild loosening of the public finances in order to invest in closing the productivity gap between Britain and other developed nations. Against a backdrop of slower growth in 2017 and 2018, Philip Hammond’s measures focused on housing and infrastructure, and the allocation of funding towards innovative sectors of the economy.
But what will it mean for Britain’s smaller firms? Our Managing Director, Peter Alderson talks about what SMEs are looking for, and what issues they tend to have around the tax system.
What did you hope to see from this year’s Autumn Statement?
Given that Britain still has a big deficit, I wasn’t expecting anything dramatic. But there were three areas where I was hoping the government would make a difference.
First, measures to encourage businesses to invest for the long term – particularly in increasing capital allowances to make it easier for them to buy new equipment.
Second, moves to tackle the current skills shortage, which has been particularly detrimental to smaller firms. Third, fuel duty is a big cost for SMEs, given that lots are either in transport or are reliant on vans and cars.
What did you think of the measures announced?
Confirmation that corporation tax will be cut to 17 per cent can only be good news for small businesses and will go some way towards restoring economic faith among the entrepreneurial community. Quite simply – any plans to reduce costs and outgoings will be of benefit to SMEs hoping to grow and expand during the current economic climate.
What do SMEs look for from the tax system?
Simplicity and lack of bureaucracy are most important. The government’s intention to move to a fully digital tax return system will also be beneficial. There does look to be some teething problems, but it will work if it’s very simple.
Beyond simplicity and the rate they pay, what kind of issues do SMEs face when it comes to tax?
The main issue is cash flow. Small businesses, with all the best intentions, put money aside to pay their tax bills twice a year. But other challenges arise: they may need some of that cash to buy new equipment or for other costs. It suddenly comes to January or July, and they realise they haven’t got the money they thought they had put aside to pay their tax.
This is more of an issue for corporation tax, as it’s a longer period before the payment needs to be made than VAT, which is only every quarter. But there is a common solution to both. Instead of attempting to put money aside themselves, a small business can use a third party financier which will put in place a credit line that will cover the tax payment, giving them more confidence about their cash flow.