As expected, the business world was focused on Chancellor Philip Hammond’s Spring Statement last week; and while it produced few major headlines, it did, on a positive note, allude to ‘light at the end of the tunnel’ as far as the decade-long period of austerity is concerned. This is welcome news, especially as we are still to learn the full impact of Brexit on UK business and industry.
The Spring Statement is important as it helps to signpost government thinking and direction of travel before the Autumn Budget puts the theory into action.
As such, there were a number of points set out that affect the business community in particular.
The announcement that the government has commenced a consultation on changes to the VAT system follows the Office of Tax Simplification report published in 2017. The report highlighted that some entrepreneurs don’t grow their business because of the tax impact when they reach the £85,000 VAT threshold. One possible outcome could be the gradual introduction of 20% VAT above the £85,000 level.
Business rates also came to the fore in the statement, with the news that the next business rate revaluation – which now takes place every three years – has been brought forward to 2021. This means that businesses can benefit from the revaluation calendar change from an earlier point.
The business community has received the above announcement positively, however, some, including the Federation of Small Businesses also highlighted that while the revaluation is to be welcomed it must not come with additional administration for businesses themselves. As outlined below:
Another issue affecting those looking to start and build businesses from scratch was the announcement of a consultation on changes to Entrepreneurs’ Relief, with efforts to ensure it does not discourage people from seeking external finance for their companies.
The Chancellor also covered important areas such as the impact of digital payments to ensure that those who wish to remain paying by cash are not disadvantaged, while the age-old problem of late payments, and how they affect SMEs, will go under the microscope in a bid to remove its ‘scourge’.
Of course, it wouldn’t be a Spring Statement without mention of the UK’s workforce, and this statement was no exception with the Chancellor mentioning skills, training and apprenticeships – critical areas as the country seeks to improve productivity. Mention here was given to potential measures to extend tax relief for training and the release of funds to help small businesses recruit more apprentices as it looks to fill the skills gap.
It was heartening to see the Chancellor address some important business-related issues that affect companies of all sizes. The intention to get firm on late payments and encouragement for those innovators that take a risk and look to build a business from the ground up, are the type of practical and future-looking actions we believe the government should be undertaking. We hope to see even more come the Budget later in the year.Mike Price, Director at MPA Group
From a practical standpoint, looking to reduce the overall tax burden – alongside the continuation of the highly successful R&D tax credit scheme – for innovating companies that are seeking answers to some important societal problems will be very helpful. Businesses, for example, looking to create less polluting transportation solutions or invent new materials to remove the need for single use plastic need all the financial support they can muster to continue their market-leading endeavours. This announcement was particularly favoured by EY, who commented:
Such initiatives can only encourage more companies to try to influence some of the huge challenges we face, and do so by more easily accessing the kind of funding and financial support SMEs need to grow, create higher skilled and well remunerated jobs, and access global markets.
It’s encouraging to see the spotlight of politicians remain firmly upon delivering support and encouragement for those businesses that seek to collaborate and innovate, create new products and capitalise on potential new markets. As it is these research and development-led companies that are the lifeblood of a future prosperous and highly productive economy.
The R&D tax credit scheme is one well proven method to support companies who are looking to push boundaries, collaborate and innovate. It is therefore great to see the Spring Statement build on many key business areas so that ambitious UK companies can make the most of the opportunities before them, and by doing so make a significant contribution to our future economic growth.