Small business community claims corporation tax reduction only benefits bigger businesses and fuel duty rise will hit it hard
The small business community has criticised the chancellor for acting to help big business while ignoring struggling smaller traders.
Osborne was criticised for failing to scrap a planned 5.6% rise in business rates, charged on business premises, due to be introduced in April 2012, and not cutting corporation tax for businesses with earnings of less than £300,000 a year. But he did offer help in the form of a simplified tax system for firms with turnovers of up to £77,000. Osborne said these small businesses (SMEs) could file tax returns made on a cash-basis – a “radical” change that will make filling in tax returns “dramatically simpler for up to 3m firms”. He said the government would press forward with its plans to integrate income tax and national insurance, announced at last year’s budget, so businesses do not have to run two different payroll tax administrations.
Osborne also reiterated his pledge to increase the supply of credit to the small business community with a £20bn government-backed loan scheme, and said it would consult on a simplified expenses system for business use of cars, motorcyles and homes. John Longworth, director general of the British Chamber of Commercesaid: “The chancellor’s commitments to contain the deficit and reduce corporation tax will be welcomed warmly by business. However, many SMEs will feel the measures overwhelmingly benefit the biggest businesses. While there is a 1% cut in corporation tax, companies will still be hit with a 5.6% rise in business rates from April.”
The 1% reduction in corporation tax to 24% from this April (falling to 22% by 2014) is of little benefit to smaller firms as it is paid by companies with profits of at least £1.5m a year (already reduced by marginal relief for those with profits between £300,000 and £1.5m).
Osborne was also criticised for failing to halt the introduction of a 3p fuel duty rise in August 2012, which will hit fuel-reliant businesses such as hauliers especially hard. The chancellor was warned his proposed higher “Machine Games duty” rate of 20%, which will come into effect on 1 February 2013, could also hit smaller leisure operators. John Walker, national chairman of the Federation of Small Businesses, welcomed the budget measures: “Especially welcome are the proposals to simplify the tax system for the country’s smallest companies. Plans to move to a simpler ‘cash accounts’ system will bring huge deregulatory benefits to small businesses, and is something the FSB has long been calling for.
But he warned that petrol prices remained a major concern for small businesses and was also disappointed that there were no plans to look into setting up a mooted Small Business Administration department to “champion small firms at the heart of government with a cabinet level minister. This is the missing link to ensuring that all initiatives have the maximum impact for small firms.”
Saurav Chopra, chief executive of discounts website Huddlebuy.co.uk, added: “If this was a budget for business it was only a budget for big business. This will not make life any easier for those hard-working small business owners up and down the country that are really under the cosh.”