In response to the Prime Minister’s announcement of a General Election on Thursday, 4 July 2024, FSB is calling for reforms to ease the tax burden on small businesses as part pf a package of “pro-growth, pro-business policies to stimulate the economy and encourage entrepreneurship.”
The call follows FSB’s latest Small Business Index (SBI) for Q1 2024, which shows that a record number of North West small firms expect tax to be a major barrier to growth over the coming year.
While the overall confidence score rebounded to positive territory at +5 from -9 the previous quarter, heralding the end of recession, more than a quarter (26%) of small businesses in the North West identified tax as their main concern going forward.
This is the highest-ever score recorded for tax burden in the region since the SBI began in Q4 2014. For context, the next highest score for tax was 25% in Q3 2015 and the North West average during this time is 15%. The other main issues were cited as: conditions in the domestic economy (62%), consumer demand (33%) and labour costs (28%).
In addition, FSB has criticised HMRC’s customer service levels as in need of urgent improvement following a National Audit Office (NAO) report showing almost half of all calls to HMRC go unanswered.
FSB Merseyside and Cheshire’s Phil McCabe said: “The owners of the UK’s 5.5 million small firms will look closely at which party puts forward the most compelling pro-growth, pro-business policies to stimulate the economy and encourage entrepreneurship. They are a large and motivated section of the electorate. A further 16 million voters are employed by small businesses.
“We need a convincing plan to bring down the cost of doing business, support small businesses to grow, and create the right conditions to encourage new businesses to start up. Tax reform should be a cornerstone of this plan.
“Or research shows that the tax burden is at a record high for North West firms, and tax compliance is another major issue - the long delays, troubles getting through, and the struggle to speak to someone who can actually help rather than read from a script compound the stress for small business owners who have received letters from HMRC saying there is a problem with their taxes.
“We have previously criticised HMRC’s ‘guilty until proven innocent’ approach to its communications with small firms, which can leave business owners in a state of panic. Every minute they’re unable to get through to someone who can help them sort things out means more worry and more alarm, which is why investment in HMRC’s customer service resources is so vital.
“Digital avenues for support certainly have their place, and many small business owners are perfectly happy to use them. But there are some times when speaking to a real person is the only way to get something sorted, particularly for queries which are anything other than totally straightforward.
“The UK tax code is 10 million words long, and it’s impossible for small firms to match the in-house tax and finance expertise of their larger rivals. As well as improving customer service levels, HMRC should focus on ensuring that the guidance it provides is clear and as simple as possible to digest.”
The Chancellor’s Spring Budget 2024 saw FSB successfully campaign on tax in a number of areas – securing a rise in the VAT threshold, a cut in National Insurance for the self-employed, and commitments to reduce the amount of HMRC-related red-tape.
Previously, FSB highlighted to Government the threat to many small firms of potential rises in Business Rates, or short-term reliefs coming to an end just as cost pressures were really beginning to bite. This led to an extension of the 75 per cent relief for small businesses in retail, hospitality and leisure in England – a sector the SBI has consistently shown is feeling the squeeze particularly badly. The Chancellor also confirmed there would be no annual inflation-linked increase in Business Rates, for firms not already covered by Small Business Rates Relief.
FSB also successfully campaigned to protect a planned reversal of a 1.25 per cent increase in National Insurance Contributions (NICs) for employers, employees and the self-employed, and was vocal on behalf of directors of limited companies who had been taken out of an equivalent reversal.
An employer National Insurance (NI) discount for those taking on military service leavers, originally secured by FSB in partnership with X-Forces Enterprise, has been maintained. Further, the NI Employment Allowance – a government initiative that allows eligible employers to reduce their NI liability - was maintained at its heightened level of £5,000, an increase that followed a successful FSB campaign.
