White paper calls for tax shake-up for small businesses as entrepreneurs offer George Osborne their two-penneth ahead of Wednesday’s budget
Believe it not, budget week is here again. It only seems like yesterday we were last reflecting on the contents of George Osborne’s red briefcase, which, in 2013, included a couple of nuggets for start-ups, not least the much-lauded employment allowance.
However, many entrepreneurs were still left feeling short-changed by the chancellor last year. And with the 2014 Budget imminent, people across the country are holding their breaths and clutching their bank statements in anticipation for what Osborne will announce this Wednesday. We’ll certainly be keeping a close eye on how the announcements impact on the individuals and enterprises that supposedly hold the key to the UK’s economic future.
For Emma Jones, esteemed small business expert and founder of Enterprise Nation, one other certainty is the need for an overhaul of what is seen by many start-ups as an unnecessarily complex tax system. So adamant is Jones that the system needs simplifying that she has teamed up with Emily Coltman, chief accountant and freelance accounting expert at FreeAgent, the accounting software provider, to offer a white paper solution to the tax conundrum.
“The simpler the UK’s tax system is made, the better for everyone,” said Jones. “We hear from small businesses every day that are baffled by the unnecessary complexity of the tax system or have spent more time and money on it than is reasonable.”
Jones and Coltman argue that in order to simplify the tax system, a reform of the current model is required so that small business owners have at the very least an awareness of the rules that surround different types of tax and their different levels of application. Coltman said: “If the tax system were straightforward, then HMRC staff would be able to understand it clearly, their tasks would be quicker to resolve, and many of these problems, which take up time and energy on all sides and cause intense frustration, would simply disappear.”
The pair propose replacing a tax on profit with a tax on sales, which, it is suggested, should be banded dependent on the amount of sales a particular business makes each year, as opposed to the trade under which the business lies.
The white paper also calls for tax to be collected on a monthly basis in order to reduce the risk of small businesses facing hefty annual or bi-annual bills, and for PAYE to be combined national insurance.
Jones added: “These recommendations would eliminate the uncertainty which would save time and money for the 4.9 million small and micro-business owners in Britain, freeing them up to run their businesses better and do what they do best.”
Needless to say, the wishes of Jones and Coltman are among many put forward by the wider entrepreneurial, start-up and SME community. Here’s what some other big business names are hoping to hear from Osborne this Wednesday:
Amit Bhatia, chairman, Hope Construction Materials
“I’m a firm believer in British manufacturing and think the government should seek to stimulate demand in the economy to allow UK firms to do what they do best – make things, innovate, invest and develop. Suppliers to the construction industry have been hit by a range of tough and rising regulatory costs which if continued will hinder essential production. Instead we need policies which ensure steady, sustainable growth, allowing us to invest in both plants and people in the long term, increase economic output and reduce unemployment.”
Philippe Gelis, co-founder, Kantox
“The government has set ambitious targets for exports by 2020, but currently SMEs are deterred by the ludicrous banks fees involved with making customer and supplier transactions overseas. The government’s export targets will only be within the grasp of SMEs if Osborne addresses the FX battle facing small businesses in the upcoming budget.”
Olly Olsen, co-founder and co-CEO, The Office Group
“In the first few years of their existence, when money is tight, there should be an exemption from tax for start-ups. It is small businesses that will create jobs and entrepreneurs should be encouraged through potential relief. If the tax burden is decreased then the additional funds could be invested into expansion and the creation of new jobs. The small business rate relief has been extended for another year but still more needs to be done. I would have this extended indefinitely.”
Stephen Fear, entrepreneur in residence, the British Library
“I would like to see a committed emphasis on creating more entrepreneurs from within the ranks of the currently unemployed, perhaps by redirecting some unemployment benefit into 'self-employment benefit'. Encouraging people to set up their own businesses is fundamental to life in modern Britain, a country considered by many to be the cradle of democracy. We must stop allowing people to waste their lives and redirecting money into building an enterprise culture would be a better way to use funds being paid out anyway.”
Giles Palmer, founder and CEO, Brandwatch
"Innovation, and the ability to get back up if things don’t quite work is vital so we absolutely need to maintain the R&D tax credits relief but also increase the grants we offer to the technology and creative industries. Most importantly, in my belief, we have to find a way to incentivise local government to encourage high growth, tech-oriented companies. We shouldn’t just be thinking of this nationally. So we could for example persuade our local branches to make empty or underused property available for free to start-ups or negotiate rates reduction for high growth businesses."
Tony Harris, founder and managing director, Contractor Financials
"Something that is seriously hampering our ability and ambition to grow is the punitive cost of business rates. We were looking at larger premises to future proof our business but are faced with the prospect of paying business rates on office space that we won’t be occupying in full. There must be some way that a more equitable foundation for local government financing can be found that properly shares the burden between householders and businesses."
We haven’t got much else to say other than ‘It’s over to you, George.’