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Finance Bill 'not helping small businesses'
Accountancy News |
17/05/2012
The Finance Bill is great news for large businesses but will not do much to enhance the competitiveness of small and medium-sized enterprises.
That is the opinion of Michael Izza, chief executive of ICAEW, who said that one of the key parts of the bill is lowering Corporation Tax to 24 per cent this year and 23 per cent in 2013, however, small businesses, which represent 99 per cent of all businesses in the UK, already pay corporation tax at a lower rate.
Writing on his official blog, Mr Izza said that small businesses will also be impacted by the reduction in the annual investment allowance which is dropping from £100,000 to £25,000.
He also suggested that the new seed investment scheme, which was announced as part of the bill and is aimed at increasing investments in early stage companies with fewer than 25 employees and gross assets of no more than £200,000, may deter investors as it is overly complex.
And it is not just Mr Izza who is sceptical of the benefits the Finance Bill will bring to small businesses, with a number of companies approached by the body having negative comments of their own.
“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," one manufacturing company was quoted as saying.
However, despite its perceived shortcomings there are also a number of positives which can be taken from the Finance Bill.
The Federation of Small Businesses (FSB) singled out measures relating to simplifying the tax system, something which is often a cause of stress for small firms.
John Walker, national chairman of the Federation of Small Businesses (FSB), said: "Plans to move to a simpler 'cash accounts' system will bring huge deregulatory benefits to small businesses, and is something the FSB has long been calling for.
"Many small firms will already use a ‘cash accounting' system and so the moves to allow businesses with a turnover of less than £77,000 to use this system will be welcome."
He cited research by the FSB for the Office of Tax Simplification which found that on average 50 per cent of small firms spend between two and eight hours understanding, calculating and completing tax returns.
"This system will make it easier for those businesses. What we need to see now is HMRC develop a better relationship with business to ensure tax compliance," Mr Walker noted.
In addition, measures suggested to help entrepreneurs and start-ups, widely recognised as the lifeblood of the UK economy, cannot be ignored.
While the seed investment scheme is described as complex by the ICAEW it is a sign that the government is trying to boost investment in start-ups.
In addition, the Enterprise Investment Scheme and Venture Capital Trusts will be extended and simplified, further encouraging investment in small firms, although once again there are concerns that the smallest businesses will miss out.
With the UK currently in a double dip recession it has never been more important to foster growth and innovation among small businesses.
Figures from Santander Corporate Banking show that small businesses created almost 173,000 jobs during the recession and five per cent of such companies account for two-thirds of all private sector employment, meaning ignoring them could do real damage.
Posted by Jon Aspinell
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