BY Itrat Bashir
Chancellor of the Exchequer George Osborne’s budget 2016-17 is being widely hailed by the business community as a pro-business budget, and in particular it should put smile on the faces of small and medium enterprise (SME) owners.
The budget 2016-17 proposes a cut in taxes for small businesses. From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. Currently, this 100 percent relief is available if you are a business that occupies a property (for an example a shop or office) with a value of £6,000 or less. There will be a tapered rate of relief on properties worth up to £15,000.
What this means is that, in the word of the Chancellor, a typical corner shop in Barnstaple or a hairdresser in Leeds or a typical newsagent in Nuneaton will pay no business rates from April 2016.
In his speech, Osborne told the Parliament that from April next year, 600,000 small businesses will pay no business rates at all. “That is an annual saving for them of up to nearly £6,000, forever. Also, a further quarter of a million businesses will see their rates cut. In total, half of all British properties will see their business rates fall or be abolished altogether,” added.
Meanwhile, to support all ratepayers, including larger stores who face tough competition and who employ so many people, the government will radically simplify the administration of business rates, and from 2020, switch the uprating from the higher RPI to the lower CPI.
To further assist the small businesses as well as household budgets, the government has decided to maintain fuel duty freeze, which according to the Chancellor will save £75 a year to the average driver and £270 a year to a small business with a van. “We have frozen fuel duty for the sixth year in a row,” Osborne maintained in his speech.
The budget also proposes to cut Corporation Tax to 17 percent in 2020. The budget document states that the main rate of Corporation Tax has already been cut from 28 percent in 2010 to 20 percent the lowest in the G20. It will now be cut again to 17 percent in 2020, benefiting over 1 million businesses.
The government has also decided to cut the higher rate of Capital Gains Tax from 28 percent to 20 percent and the basic rate from 18 percent to 10 percent from April 2016 (except for residential property and carried interest), and extend entrepreneurs’ relief to long term investors in unlisted companies.
The Federation of Small Businesses (FSB) welcomed the measured introduced by the government for small businesses.
Mike Cherry, Policy Director at FSB, said, “In a budget constrained by both the need to reduce the deficit and the economic outlook, the Chancellor has 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.”
“The combined measures announced on business rates, the single biggest tax cut in today’s Budget, will be viewed by our members as a welcome and important step on the road to fundamental reform. In addition, online retailers will benefit from steps to secure a level playing field for smaller online businesses on VAT,” he added.
He also said freezing of fuel duty will be universally welcomed by small businesses right across the country. He also observed that the new devolution deals, alongside increased investment in roads, rail, and flood defences, should give a much needed boost to the UK’s infrastructure.
“Altogether, 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.”
Dr Rami Ranger, a leading British-Indian businessman, welcomed the budget by saying that it is good budget for the hard-working families.
He said the budget is a business friendly with lower corporation tax and fuel duty freeze. He also welcomed the decision of increasing the Income Tax threshold, which in his opinion will allow people to keep more of their income in their hands. “Moreover, sugar tax will save the nation’s health and cut down the NHS cost of treating illnesses related to obesity,” he added.
James Sherwin-Smith, CEO of Growth Street, an SME business overdraft provider (and an SME itself), said as an alternative overdraft provider to SMEs and an SME themselves they are encouraged to hear the Chancellor’s plans for a more favourable environment for small businesses.
“However the Chancellor neglects to address the biggest challenge faced by the UK SMEs, funding. He is doing nothing to address the unfair, unregulated SME finance market, which is stifling small business growth in the UK,” he added.
London Chamber of Commerce and Industry (LCCI) also gave the thumbs up to the Osborne’s budget business boost.
Commenting on the budget, LCCI Chief Executive Colin Stanbridge said the Chancellor has delivered a budget that includes good news for London business. “Funding to move Crossrail 2 to the next stage is most welcome, this is a transport project that, once operational, will bring economic dividends well beyond London.” he added.
According to him, the announcement to allow the Greater London Authority to retain all business rates revenue from April next year could see more effective targeting of resources towards local infrastructure that underpins local business priorities.
Mihir Kapadia, CEO at Sun Global Investments, believes that this was clearly a budget designed for the saver, not the investor. “In fact, the downgraded growth figures and higher debt to GDP level gives investors reason to doubt that the government’s long term plan is increasing economic stability in the UK,” he added.