Since the banking crisis in 2008, small and medium-sized enterprises (SMEs) were, and continue to be, seen as the key to the future growth of Britain’s economy.
A large proportion of SMEs, particularly in the South West, are family businesses and, therefore to support this view, you would like to think that the Government would look kindly on the sector.
Strange perhaps that recent Budget & Autumn Statement announcements have seen the introduction of a number of penal measures for small business owners. Instead of positive incentives, people running small family businesses have seen some of the largest, by proportion, increases in tax.
Since April 2016, directors wanting to pay themselves a dividend out of taxable profits or reserves, have suffered a tax charge ranging from 7.5% to 38.1%. From April 2018, the dividend income allowance drops from £5,000 to just £2,000. As a consequence, depending on the rate of tax they pay, a couple will see their tax liability rise by between £450 and £2,286 per annum.
Landlords and second property owners have also been hit particularly hard.
The introduction of higher rates of Stamp Duty Land tax (SDLT) on additional homes and the phased reduction in the allowable percentage of finance costs deductible from rental income are already having a negative effect on the local property industry.
Only last week, the Office for Tax Simplification (OTS) published its review of VAT – the first since the tax was introduced over 40 years ago.
There are four potential options being tabled, which include, leaving the threshold where it is, decreasing it to £45,000 or increasing it to £250,000/£500,000.
The current level is often seen as a barrier to small business growth and, with astute owners already gearing up for Making Tax Digital, it will be interesting to see which option the Chancellor opts for.
The ongoing uncertainties around Brexit coupled with the Bank of England’s, albeit modest, recent increase in base rate, have meant that confidence is – at best – faltering.
The agricultural sector in particular, post Brexit, needs a stable and certain fiscal environment, which in turn, encourages innovation and investment in farming businesses.
On a positive note, the cost of borrowing remains low and, with correct advice, planning around succession and exits remains most favourable from a tax perspective.
So what would our small and family business clients like to see announced in the up-coming Budget?
Being realistic, let’s hope that the sector is left ‘well alone’ this time, any further hits could prove terminal for some.
Being positive, a relaxation in SDLT and tax rates for landlords, plus the much vaunted reduction in business rates would be most welcome.
Finally, and it won’t happen, can we bang the drum again for a reduction in VAT to 5% for the leisure and tourism sector??!!
The recent headline in the local press was, “Theresa’s support for West business”; the article paying tribute to the West country businesses powering the economy of the “Great South West”.
Let’s hope that in his speech on the 22nd, her Chancellor, Philip Hammond, supports these comments with some positive announcements for the small and family business sector. It is not just the lifeblood of the South West but of the UK itself.