Tory ministers are beginning to buckle under increasing pressure to remove the financial burden which is crippling small businesses in the UK. The Chancellor of the Exchequer, George Osborne has been warned that the current tax burden on UK companies is too high and if business rates levied on firms for local services are not reduced, numerous small firms will collapse and have a negative effect on the economic recovery.
Matthew Hancock, a Conservative MP who heads up States for Skills and Enterprise applauded the plans and added the cut backs were also needed on income tax for low-paid workers. The government scheme to offer small businesses National Insurance relief for low paid staff that was introduced during the summer were a step towards that, but it does not benefit sole traders.
No tax relief for small businesses
In April 2014, business rates for small UK firms will increase and on average will cost companies a further £430 in tax liabilities. One of the arguments that is currently being addressed by the Treasury is to scrap those plans in favour of the “low tax Tory” agenda.
Corporation tax for large companies has already been cut and will be cut by a further 2 per cent to 20% by 2015. The British Chambers of Commerce and the CBI have both called for similar reductions in business tax for SME´s. Inside Whitehall the Business Department has also been lobbying against Osborne to reduce business rates.
Whilst small businesses await a government decision on possible tax breaks, it is good news for low earners. The coalition recently announced plans to cut income tax for low earners by raising the personal allowance to £10,500.
Implementing cuts on income tax will cost the Treasury around £1bn and nothing has been written in stone. Osborne did comment that the shortfall could be made up by imposing a mansion tax on the filthy-rich, but the chancellor also conceded that the Tories would not entertain such an idea.
Universal credit program could hinder sole traders
Meanwhile, the Government´s plan to introduce the Universal Credit program has been criticized by the Work and Pensions Select Committee (WPSC) for unnecessarily giving sole traders and contractors more administrative work to do. The program went live in the north-west of England in April 2013, but the government is being urged to postpone a countrywide roll-out scheduled for 2017.
The National Audit Office issued a damning report citing the program is flawed and that the “Department has lacked a detailed view of how Universal Credit is meant to work.” The WPSC added that Universal Credit could act as a deterrent against entrepreneurship. Such barbed comments will have to make the cabinet have a rethink.
If you have any concerns about how business rates or the Universal Credit program will impact on your small business, contact a member of our friendly and knowledgeable team on 08000 235 234 or email firstname.lastname@example.org.