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Budget 2016: 5 key take aways for business owners
George Osborne’s budget is already being praised by many British business owners for the boost it could offer to Britain’s small and medium sized businesses, as they are hailed as a cornerstone of The Chancellor’s plan to grow Britain’s economy.
However, with so many plans outlined in yesterday’s budget announcement, many business owners may be asking “how will these plans impact my business?”.
To help you better understand what aspects of the budget are relevant to you and your business, we have summarised the relevant points of the budget below.
Business Rate Relief
It’s good news for Britain’s small and medium sized businesses, as George Osborne announced yesterday that we can expect an additional 600,000 commercial properties to be added to the business rates relief threshold. This is good news for SMEs as the plan is looking to create a more proportionate system when identifying the business rates that businesses should be paying.
However, there’s also good news for those businesses still paying full rates. According to The Chancellor, businesses can expect future business rate growth to be relaxed to some degree as the government switches from measuring increases against the Consumer Price Index (CPI) to Retail price Index (RPI). In monetary terms, this effectively means that the business owners who are paying business rates will receive an equivalent tax cut worth around £370m in the first year alone.
In addition, The Chancellor has also announced that stamp duty will be cut for any buyers of commercial properties, which could make buying your own premises – as a SME owner – a more attractive prospect. This, in turn, could bring a whole host of additional benefits to a business, such as investing money in improving the energy efficiency of the premises, which will reduce overheads.
Mike Cherry, for the Federation of Small Business, said:
“The combined measures announced on business rates – the single biggest tax cut in today’s Budget - will be viewed… as a welcome and important step on the road to fundamental reform.”
Competitive Corporation Tax
In other good news from yesterday’s announcement, businesses will now be able to keep more of their profits as The Chancellor announced that Corporation Tax will be falling from 20% to 17%, instead of the 18% that business owners were initially anticipating. This positions Britain as one of the most competitive countries for Corporation Tax, making the UK market more appealing for companies looking to do business, as they can keep more of their profits.
Carolyn Fairbairn, Director-General of CBI hailed the changes to corporation tax, stating “The Chancellor has listened to our concerns about the mounting burden on firms and chosen to back business to grow the economy out of the deficit,”
“The reduction in the headline corporation tax rate sends out a strong signal that the UK is open for global business investment.”
SMEs can get competitive online
Another way that George Osborne is supporting the growth of Britain’s smaller businesses is by waging war on foreign retailers who don’t pay VAT when selling online in the UK. As a result, these foreign retailers stifle the competitiveness of UK vendors looking to sell through the same marketplaces, by offering the same products at a lower prices.
In the plans, The Chancellor announced that they will be targeting the companies who run online marketplaces, such as Amazon and eBay. The aim is to hold these companies responsible if they do not taken appropriate action against foreign marketplace retailers who are not paying VAT when remotely selling in Britain. In addition, it’s believed that the government may also take action against facilities used to store foreign vendor’s goods in Britain, if it is deemed the facility has not performed a similar due diligence.
In an official document accompanying The Chancellor’s budget announcement, it was revealed that “HMRC [her majesty's revenue & customs] will be able to require non-compliant overseas traders to appoint a tax representative in the UK, and will be able to inform online marketplaces of the traders who have not complied. If traders continue to evade VAT and no action is taken to prevent the fraud, then online marketplaces can be made liable for the VAT.”
More incentive for SME investment
It appears that investment in small and medium sized businesses in the UK is also set to get more attractive. George Osborne announced that entrepreneur’s relief will now apply to all angel investors. Previously this relief was only available to investors who were the director, or employee of a company, and they had to own more than 5% of it. These stipulations have been removed following yesterday’s announcement, however, the relief remains capped up to £10m.
This extension of relief has been hailed by investors as another innovative way that the government is looking to encourage the growth of smaller businesses to help stimulate the growth of the country’s economy.
Sally Goodsell, Chairwoman of the Become an Angel investment campaign said “[the changes] confirm the commitment of the government towards the entrepreneurial community, it also provides further proof that entrepreneurial businesses in this country are the key to economic growth. It’s good news that the government is seeing that as key to its economic strategy.”
Improving access to HMRC
As well as small business growth, George Osborne has also announced plans to help support SME owners themselves by extending HMRC opening hours. According to The Chancellor, the service will now be offering support to business owners seven days’ a week, in an effort to improve to overall customer service of the HMRC.
As part of the plans, it is expected that the HMRC will also extend the opening hours of their phone lines and recruit over 800 new employees by 2017 in order to facilitate this.
The general consensus following yesterday’s budget announcement is a positive one. It is believed that the chancellor has finally started viewing SME owners as an integral part of his plan to help reduce Britain’s deficit. However, some have criticised the chancellor claiming that his support is simply an effort to keep small business owners on side ahead of the upcoming EU referendum.