The new Chair of the Federation of Small Businesses (FSB), Martin McTague, has written a letter to the Chancellor, Rishi Sunak, calling on him to scrap the National Insurance Contribution (NIC) increase to support small UK businesses.
The FSB warns that 280,000 businesses are at risk of collapse and calls on the Chancellor to announce measures to support small UK businesses in his Spring Statement. Amongst the measures they want, is a move away from the huge tax break for big corporations.
As 99% of UK businesses in the private sector are Small and Medium Enterprises (SMEs), supporting them will help the UK economy to recover from the pandemic. Furthermore, their research shows that only 4% of the small businesses perceive the super deduction tax break as a top incentive to invest. Which the FSB suggests means that mainly big corporations and multinational businesses will use the super deduction.
How The FSB Wants The Chancellor To Support Small UK Businesses
In his Spring Statement on 23 March, Rishi Sunak is expected to confirm the NIC annual increase, worth £18bn, as well as dividend taxation. It has also been speculated that the Treasury is planning to end the R&D tax credit incentive for small research-intensive businesses and instead support larger corporations. In its letter, the FSB has set out its recommendations they hope the Chancellor will include in his Spring Statement to support small UK businesses.
The FSB encourages the Chancellor to increase the employment allowance to £5,000. The aim of this allowance is to enable small businesses to reduce their national insurance costs. And by increasing it, it would decrease the impact of the NIC tax hike for small businesses.
The time to deliver a low tax, high investment, dynamic economy is now, not later in the political cycle. The Chancellor cannot control the wholesale price of gas and oil, but he can control tax policy.Martin McTague, National Chair of Federation of Small Businesses
A further recommendation is to increase the rateable value ceiling for small business rates relief to £25,000. The FBS says, this would remove 200,000 community small businesses from the business rates system.
In view of the rising energy costs, the organisation calls for an extension of the support with energy costs that is allocated through the council tax system to include micro businesses via the business rate system. Additionally, they want the Government to launch a Help To Green programme to help small businesses to go green.
One reason so many small businesses struggle, is the poor payment culture in the UK. To change this culture, the FSB suggests making the Audit Committees directly responsible for ensuring best practice in supply chains is maintained. This would go a long way to help support small UK businesses.
The FSB also wants the Treasury to expand the statutory sick pay rebate for small businesses and make it permanent. This would allow small business to be more competitive on the labour market.
Another recommendation from the FSB is to extend the eligibility to the Help To Grow Digital and Management schemes. Because with the current eligibility criteria, 90% of small businesses are not eligible to participate in the Help To Grow initiatives. By widening the eligibility, 750,000 more small businesses would be able to get help and support through these schemes.
Finally, the FSB recommends that the R&D tax credit system is simplified to make it easier for small businesses to access its benefits. As currently, small businesses have to use intermediaries, for whose services they have to pay.
Why The FSB Has Written To The Chancellor
According to the latest Office of National Statistics’ (ONS) Business Insights study, 5% of business owners are not confident their businesses will survive the next three months. This means that of the 5.6 million businesses in the UK, 280,000 are at an immediate risk. The FSB believes that their recommendations will support small UK businesses at risk and prevent them from collapsing.
The ONS has also announced that 25% of businesses in the accommodation and food services sector are still not fully trading yet. This sector has been hit hardest by the pandemic, and many businesses have concerns about how they will perform in the next few months. The main reasons for the bleak outlook of these businesses are the inflation of goods and services, which 21% named and high energy costs, which 15% identified.
The FSB believes that the only way for the UK economy to recover is by helping small businesses. That’s why they call for the Chancellor to support small UK businesses when he gives his Spring Statement later this month.
The Chancellor has a choice: plough on with damaging tax hikes, or take steps to protect the most fragile and empower small firms to deliver his ‘culture of enterprise’ vision.Martin McTague, National Chair at the Federation of Small Businesses