Autumn Budget: Self-employed concerned about Chancellor’s upcoming announcement
The UK’s 4.8 million-strong self-employed community is urging the Chancellor to avoid targeting it with further tax changes in today’s Autumn Budget.
The Federation of Small Businesses (FSB) is warning of the drag on output that could result from a lowering of the £85,000 turnover threshold for Value Added Tax (VAT) registration.
Its new research shows that registered small firms spend 44 hours a year, more than a working week, complying with VAT obligations.
Mike Cherry, FSB National Chairman speaks to Business Leader ahead of the imminent Autumn Budget announcement.
Speculation about a drop in the VAT threshold is very worrying. VAT-registered entrepreneurs spend a working week every year handling compliance with this hugely complex tax – time that should be spent growing their businesses.
Reducing the £85,000 turnover threshold would place a huge burden on the self-employed. These people aren’t like corporations – they don’t have accounting expertise on tap.
Following a swiftly reversed decision to increase Class IV National Insurance Contributions (NICs) in the Spring, the Government announced a one-year delay to the abolition of Class II NICs earlier this month.
In April, responsibility for determining who falls under IR35 legislation in the public sector was switched from lying with contractors to being a decision for the organisations that hire them.
The “off payroll” rules force some self-employed workers to pay the same income tax and NICs as employees. Initial feedback suggests that this rule change has led to skills shortages within public sector organisations.
The Federation of Small Businesses (FSB) is calling on the Chancellor to resist an extension of IR35 rule changes to the private sector until a full assessment of their impact has been undertaken.
After Spring’s NICs debacle, the Chancellor would do well to steer clear of any ill-thought through changes that could threaten the flexibility of freelancers across the UK.
Delaying the abolition of Class II NICs will have come as a blow to many. Singling out the self-employed for this delay is all the more reason to produce a Budget that throws them some lifelines.
Extending public sector IR35 legislation to the private sphere today could hamper the prospects of self-employed contractors. The Chancellor needs to undertake a thorough assessment of the impact of this year’s rule changes before any further roll-out is considered. We need to avoid an environment where businesses refuse to take on contractors because of the headache attached to IR35.
Other FSB Budget asks include a call to protect the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS). Early stage firms raised £2 billion to help fund their growth plans through the initiatives in 2015-16.
Small firms are equally seeking support on business rates. FSB is urging the Chancellor to detail plans for ending the staircase tax while bringing forward the change from Retail Prices Index (RPI) to Consumer Prices Index (CPI) indexation for bill increases to April 2018.
The UK’s largest business group is also calling for measures to improve market access for smaller housebuilders, including an extension to the £3 billion Home Building Fund launched last Autumn and reform of the Community Infrastructure Levy (CIL).
With the Brexit clock ticking, other nations are trying to tempt our businesses to their shores. The Budget marks an opportunity to position the UK as the best place in the world to invest in innovative firms.
That starts with protecting investor incentives. We need to encourage those firms that are the right fit to look beyond traditional bank products to equity investment. The EIS and SEIS are integral to making that happen.
Small firms have had to endure seven months of business rates chaos since April’s bruising revaluation.
Those affected are hoping today’s Budget ushers in a period of greater stability. Detailing plans to end the staircase tax and bringing forward CPI indexation for bills would certainly help make that a reality.
It was encouraging to hear the Chancellor address the need to “re-create the small and medium-sized housebuilding sector” over the weekend. If this Government is serious about tackling the housing crisis, it needs to improve access to finance for smaller construction firms.
It should also rethink the infrastructure levy to ensure it doesn’t disproportionately impact small developers as it does today.