The Federation of Small Businesses (FSB) has urged the Chancellor to unleash small business confidence at today’s Budget by making good on manifesto pledges and introducing a raft of measures to support those suffering from coronavirus-linked disruption.
The FSB would like to see an immediately deliver manifesto commitments to increase the Employment Allowance, reduce business rates, and reform, rather than scrap, entrepreneurs’ relief as coronavirus effects are felt.
The FSB has also urged the reintroduction of a Statutory Sick Pay (SSP) rebate, widening of HMRC Time To Pay eligibility criteria, and targeted access to finance measures whilst stressing the importance of a hardship fund for the self-employed who lose contracts or are forced to self-isolate.
With increasing numbers of firms affected by the spread of COVID-19, FSB recommends that the Treasury:
- Immediately introduces a statutory sick pay rebate, or equivalent, for small employers.
- Widens eligibility criteria for HMRC Time to Pay arrangements, currently only accessible to severely financially distressed businesses, and ensures banks take a lenient approach to small businesses in distress where repayments, overdrafts and loans are concerned.
- Introduces targeted access to finance programmes for firms struggling with cashflow issues, following Japan’s example by making interest free loans available to small firms.
- Creates a hardship fund for the self-employed – who are not entitled to sick pay – to provide them with support should they lose contracts or fall ill.
- Considers a temporary Value Added Tax (VAT) cut should consumer demand significantly drop off.
The ‘Small Business, Big Heart’ report shows that more than a third (34%) of small employers have faced costs greater than £1,000 due to sickness absence in the last 12 months. The study also gives examples of firms almost driven to the wall due to their inability to reclaim SSP.
The group’s other recommendations include freezing Insurance Premium Tax (IPT), which is payable on the vast majority of insurance products. The standard IPT rate has soared to 12% in recent years, netting the Treasury over £6 billion in the 2018/19 financial year, up almost 10% compared to 2017/18.
Small firms are encouraged to take out interruption insurance to mitigate against the impacts of unexpected events such as the spread of coronavirus, but IPT serves as a substantial disincentive to purchasing such cover.
FSB is also encouraging the Chancellor to swiftly deliver on manifesto pledges made to the small business community. They include:
- Cutting the ‘jobs tax’, by increasing the Employment Allowance to £4,000 from April this year, thereby allowing a small business employing four staff on the National Living Wage to be exempt from national insurance contributions.
- Fundamentally reviewing business rates, with a focus on reducing the tax take and burden of rates, while taking more small firms out of the system altogether, rather than replacing the levy with a land value tax.
- Reforming rather than scrapping entrepreneurs’ relief, which benefits 43,000 business owners each year – many of which use the incentive to assist with retirement planning – 38,000 of those claimants receive an average discount of £15,000 on their capital gains tax bill.
FSB National Chairman Mike Cherry said “Today’s Budget is the Chancellor’s first big test, and an opportunity to show he is unequivocally on the side of the small business community at an uncertain time. “Supporting small firms that are being impacted by the spread of coronavirus means both introducing new, targeted measures and delivering on existing promises. The horse has already bolted in many countries, so it’s critical that the Chancellor takes action now to mitigate any future escalation of the situation here in the UK.”
“We also need to see this Budget deliver on the manifesto promises made to UK small businesses and the self-employed in the run-up to the election. With a new financial year, fresh living wage increases and business rates hikes for many taking effect next month, we need to see government – local and national – and HMRC pulling out all the stops to assist small firms.
“Levelling up starts with supporting small businesses and the self-employed: our country’s everyday entrepreneurs. They are looking for the help that was promised to them on the election trail.”
“The success of our economy in uncertain times starts with the success of the small firms that make-up 99 per cent of our business community – they create two thirds of new jobs. This needs to be a small business Budget.”