By Nick Winch, London Policy Manager, FSB (Federation of Small Businesses)
“The measures announced in the Emergency Budget will go a long way to reducing the deficit and will please the 93 per cent of FSB members who called for a clear plan on tackling the country’s debt.” said FSB National Chairman John Walker.
“The increase in VAT to 20 per cent will, however, hurt small firms who will have to pass the increase on to their customers, unlike many big businesses who may chose to absorb the cost.
“We welcome moves to give a national insurance holiday to start-up firms, but it a wrong that this is not extended to businesses in the Greater South East. We are also but are concerned that with 70 per cent of firms operating below capacity, those businesses already trading will not be helped. We need to see a full reversal of NICs increases to fully offset the ‘tax on jobs’ which the previous government initiated,” he added.
Referring to specific issues in the budget, the FSB welcomed many of the measures that the Chancellor has announced in his Emergency Budget, but expressed concern that rises in Employer National Insurance Contributions (NICS) were not completely reversed.
The FSB is pleased that the Treasury has listened to concerns about hiking Capital Gains Tax to 50 per cent, and has chosen instead to increase it to 28 per cent for those on the highest incomes. The FSB welcomes moves to increase the Entrepreneurs Relief threshold to £5 million from £2 million. This relief was called for by the FSB under the previous government.
The move to reduce the Small Companies Tax Rate to 20 per cent is welcomed and will help over 850,000 small firms. The FSB is also delighted that the Government will extend the Enterprise Finance Guarantee which was introduced following calls from the FSB and helps many small businesses who face difficulty in accessing credit.
The FSB welcomes the proposals to exempt new businesses from NICs but believes that this should also be extended to existing businesses, which have the capacity to employ people. This useful scheme should also be made UK-wide and include businesses in London and the Greater South East.
Moves to increase personal allowances by £1,000 are also welcomed as it will help to reduce the pressure on businesses from wage demands and give employees more cash in their pockets.
Government plans to hike VAT to 20 per cent from 17.5 per cent will hurt small businesses in the high street. However, we are pleased that there is some time to go before the increase takes place and it is interesting to note that common sense has prevailed with the increase coming into play on 4 January 2011 and not on New Year’s Day.
For many small businesses insurance on many items is a must and the proposal to increase Insurance Premium Tax (IPT) from five to six per cent is a tax on responsible business and should be reversed.
The FSB was pleased to see that its campaign to save many businesses in the tourist sector has reaped results with the Chancellors announcement that tax breaks for Furnished Holiday Lettings will continue.
While the Chancellor referred to stability in fuel prices, the FSB is concerned that proposals for a fair fuel stabilizer to control erratic movements in the price of fuel were not announced today.