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Summer Budget: South East SMEs talk tax

Ahead of Wednesday’s emergency Budget, we approached businesses in the South East to find out their hopes and expectations for the Chancellor’s speech. Unsurprisingly, there was one topic that stood out as the principle concern for SMEs in the region - tax.

Ben Towers, teenage entrepreneur and founder of Social Marley and Towers Designs, is hoping the Chancellor will make a bigger commitment to startups, he commented: “SMEs have been given some support in previous budgets. However, startups still find it difficult to get funding and have to resort the crowd funding sources, Funding circle is excellent for existing SMEs so a startup fund for new or young entrepreneurs would be a useful for the chancellor to consider.”

Tracy Ewen, managing director of Kent-based IGF Invoice Finance, also wants to see more attention given to SMEs, she said: “With the government bringing out its Emergency Budget on Wednesday, there are a number of actions we want to see in order to give SMEs the support they need to grow.

Firstly, there needs to be definitive legislation on prompt payments from blue chip companies that will protect SME suppliers from late payers. The current terms that many small businesses are subjected to are neither fair nor sustainable, but it is a reality that they have very little power to change. It is up to the government to stand up for SMEs and deliver on their legislative promises.

Next, the government needs to provide support and easy access to finance that is geared towards the smaller SMEs, not just the financially astute. The ruling that banks must now direct firms towards alternative finance providers is a step in the right direction, but the approval rate of these referrals be monitored to ensure the scheme is a success.

These steps will help the government demonstrate that it’s truly committed to seeing SMEs in the UK develop, grow and thrive.“

We also spoke to Amber Atherton, founder of London-based fashion startup My Flash Trash is hoping the increased support for small businesses will start with tax breaks “particularly around VAT when trading internationally.”

Amber ships her products all over the world, and has experienced difficulty with the high taxes on importing and exporting, she said: “A lot of the time we don’t want to pass on the high fees we’ve had to pay in import duty or staff overhead to the consumer, as an accessible brand the taxes and fees are not adapted to our affordable products which can be damaging if we are not selling volume.

“I think giving a business breaks until they are doing £500k + in turnover is sensible otherwise rates, fees and taxes all combine to work against you making your business a success.”

Mark Pearce, Partner, in the international tax team at Thomas Eggar believes that there will be further changes to the resident, non-domiciled regime. This could include 3 year lock-in for claiming the remittance basis (this is already under consultation), a cap on the number of years one can claim the remittance basis or an extension of the deemed domiciled regime.

Sarah Watkinson-Yull, CEO of London-based Yull shoes would like to see a priority in decreasing VAT for small businesses. Sarah said: “If the government want to function as ‘heroes of the economy’ small businesses need to see immediate action and decreasing VAT should be at the top of the checklist. It’s much harder for small firms to absorb the 20% VAT, instead we have to pass the cost on to our customers, reduce stock levels and dig deep to find other ways to save cost.

“A decrease in VAT means I, along with other small businesses, will be able to look into employment -something I’m eager to do to drive my business forward, but something which has been made almost impossible due to the latest increase in VAT, which completely undermined the government’s private sector led recovery.”

Martin Campbell, managing director at fintech start-up Ormsby Street, is hoping for the budget announcements to be more connected, enabling small businesses to stay onside with legislative requirements:

“The tax and regulatory environment is highly complex for small businesses, because each government department sets its own - often conflicting - standards and its own thresholds. At what level of turnover is it compulsory to register for VAT and why isn’t that the same as the threshold for simplified tax accounts? Why are some expenses allowable as business expenses for corporation tax but not for VAT? At what number of employees does a company have to undertake real-time PAYE reporting?

“Many small business can end up falling foul of this legislation, because each area of legislation carries its own standards, which can be changed without reference to the other standards which a company has to adhere to.”

“So policies and departments have to be better connected. This could be done with a tool - it could easily be part of the Government’s extensive online investment - that allows a company to provide its industry, its turnover and its number of full-time and part-time staff and be informed of ALL the standards which apply, plus be advised on an ongoing basis when they change.

“If this is too complicated to produce in a cost effective way, then the Government should look at reviewing every legislative change for how it can bring standards for different pieces of business legislation closer together, rather than fragmenting them further. There would be benefits to the economy in simpler and better reporting, and small businesses would benefit hugely from this new clarity around legislation.”

Vince McLoughlin, partner at Russell New, a Sussex-based firm of business & tax consultants expects tax avoidance to be hot on the Chancellor’s agenda: “Inevitably Osborne will outline more plans to tackle tax avoidance and aggressive tax planning by the rich. He will face little opposition from the business community—specifically to his plan to raise over £5bn from targeting evasion and “aggressive” avoidance.

“But this doesn’t help the majority of businesses and we must also see confirmation that the annual investment allowance (AIA) for capital allowances will be kept at £500,000. By committing to a long term rate, Osborne will provide stability and consistency for firms that like to plan and invest for the long term, many of which may be delaying investment plans waiting for this announcement.

“If he does confirm that the rate will be kept at this higher level this would kick-start the kind of investment needed to enable businesses to thrive.”

Subscribe to our daily email bulletin to keep up to date with regional SMEs news as it happens. We’ll be live tweeting the Budget, so head over and follow us at @bdailysoutheast.

This was posted in Bdaily's Members' News section by Ellen Forster .

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