Martin Bixel - 28 Mar - 0 Comments
Britain’s “nation of shopkeepers” were the biggest winners after a range of giveaways for small businesses that came at the expense of their larger counterparts.
Industry was divided by size in its reaction to a package of reforms that included changes to business rates, moves to tackle tax avoidance and a cut in corporation tax.
With small companies getting the lion’s share of the benefit of an overhaul of business rates and commercial property tax, representatives of larger employers expressed concerns that they had been left to foot the bill.
Chris Sanger, head of tax policy at EY, said big businesses would be left with a “sour aftertaste” from restrictions to tax relief on trading losses and debt interest as well as other moves designed to tackle tax avoidance. The reforms are predicted to raise £9 billion over the next five years. Mr Sanger said the feeling of disappointment would be only slightly offset by a further one percentage point cut in corporation tax at the start of the next decade, bringing the tax on profits down to 17 per cent.
By contrast, small businesses were handed a £6.7 billion tax cut over the next five years, in the form of a permanent reduction in the number of businesses who will have to pay business rates at all as well as savings for those small companies who do.
Small business owners also welcomed changes to commercial stamp duty, capital gains tax and a new £1,000 tax-free allowance for people with part-time, home-based ventures. An existing scheme designed to allow business owners to keep more of the proceeds of a sale of their venture, entrepreneurs’ relief, was extended to long-term investors in small companies.
Mike Cherry, policy director at the Federation of Small Businesses, praised the chancellor, saying he had “listened to our calls for the tax system to be made simpler for small businesses and the self-employed and taken important action on business rates.”
Emma Jones, founder of small business network Enterprise Nation, which represents thousands of micro businesses, described the measures as great news.
“The best news of all is the permanent reduction in business rates, which will offer a big boost to the increasing number of independent retailers and producers we see every day looking for a foothold on our high streets.”
However, Mr Sanger said: “Manufacturers and larger retailers will be disappointed with the lack of action by the government [on business rates], with those sectors currently paying 40 per cent of the tax but only constituting 16 per cent of the economy.
“This retains the distortions in the current system, deterring manufacturers from improving their buildings and penalising the largest bricks and mortar retailers.”
Carolyn Fairbairn, director-general of the CBI, said Mr Osborne had delivered a “stable budget for business facing global stormy waters”. However, she criticised the restrictions of the tax treatment of trading losses, saying they would “make it harder for larger scale-up firms and companies that have been through tough times to play their part in the recovery”. Frank Haskew, head of tax faculty at the Institute of Chartered Accountants in England and Wales, warned that the tax avoidance measures added increased costs and regulatory burdens. “The UK tax code is one of the longest and most complicated in the world and additional changes will add to this complexity,” he said.
Industries including private equity and property investment were angered that they will be left out of a cut in capital gains tax from 28 per cent to 20 per cent.
The freezing of fuel duty and plans for more infrastructure investment, including a rail link between Manchester and Leeds and Crossrail 2 in London, were more broadly welcomed.
Mr Cherry said: “These measures should help to drive productivity and boost small business confidence levels, which have faltered recently in the face of a number of domestic policy and global economic challenges.”
Adam Marshall, acting director-general of the British Chambers of Commerce, said: “Business wanted a steady, workmanlike budget, and that’s what we got.”