Ahead of the Autumn Budget, Xero’s Director of Small Business, Darren Upson, explains the key areas that the Chancellor needs to focus on to support the small business community. Darren is in regular contact with a number of the 250,000 or so British-based small businesses running on Xero so has a strong understanding of the challenges they’re facing.
- A reform of business rates
Small businesses are dealing with huge market uncertainty right now, so the last thing they need is the added burden of financial and legislative chaos. The business rates revaluation which took hold in April of this year is only making things tougher.
What’s desperately needed is a complete reform of the whole business rates structure to reduce the tax burden on small firms. These rate rises are linked to the Retail Price Index (RPI) which has largely been discredited, and there is a call from groups including the Federation of Small Businesses (FSB) to link rate rises to the consumer price index (CPI) instead.
Added to that, the staircase tax causing bill increases of over 4,000 per cent for some small businesses is impacting businesses badly, particularly those in London. As part of this reform, the government needs to set up separate thresholds for small businesses operating in inner and outer London, along with a clearer strategy that has broad emphasis on affordability.
2. A focus on digital
As with most businesses, there needs to be more of an emphasis on digitising output. More businesses than ever before are embracing digital bookkeeping – in the last year alone, Xero UK subscribers have grown by over 54 per cent. This is a good sign, but for the UK to maintain its standing in an increasingly global digital marketplace, the government must set out a clearer and more comprehensive strategy which includes how the workforce will be equipped with the right skills.
Despite its delay, the Making Tax Digital reform is still very much on its way. Small businesses now need clarity on whether it will sit alongside a simplification in tax rules, what the timescale is looking like, what financial support there will be and how it will be implemented alongside Brexit negotiations.
3. A drive to support small business growth
We’re all aware of the Brexit instabilities but just as worryingly, new figures from the ONS reveal that productivity by output has fallen by 0.1 per cent in the three months to June – a continued decrease from earlier in the year. As a result, the UK is one of the weakest G7 economies for labour productivity.
All eyes are on the government now to make sure Brexit talks are smooth, but this can’t detract from making sure the right conditions are in place for home growth. A budget that rules out any new business tax increases and one that maintains investment incentives is integral for small business survival far beyond Brexit.