Two weeks after the government’s latest interest rate rise announcements, the impact on small businesses throughout the capital is now being felt.
The theory behind raising interest rates to curb inflation is always a moot point for business owners. With less money flying around for people to spend, businesses are undoubtedly going to be disproportionately affected.
There have been 14 consecutive interest rate hikes to date and with an added second self-assessment July HMRC tax deadline payment now in force, many small businesses are going cap in hand to HMRC to request help in payments.
During the Covid pandemic, HMRC had relief in place for small businesses, many of whom directly benefited. However, that relief was always just a loan. Many businesses now have repayments to be made as well as struggling with meeting current tax payments.
Arguably it is now that HMRC should be offering more help to small businesses. It is my experience talking to clients as part of my business coaching that the opposite is happening. An email was sent around by the finance brokers used by the umbrella company I coach under.
That email stated that HMRC is now being less than helpful now when it comes to repayments and payment plans. The email said “HMRC is getting stricter of late in terms of tax payment and paying in instalments will not be the easy option going forward anymore.”
It could be said that any pandemic relief loans from HMRC would always need to be paid back and small businesses should have planned for this. However, what small businesses could not foresee was following the pandemic the UK would be dealing with the Brexit fallout and then the war in Europe.
All of those factors have caused a cost-of-living crisis relatively the likes of which have never been seen before. This perfect storm of issues has caused such a tightening for small businesses, many do not know how they will survive.
Another national paper reported this week that HMRC is also ramping up their investigations into British taxpayers with 21% more enquiries in the last two years. The report says that last year alone this jump in compliance activity resulted in £ 814 billion in tax revenue.
This is good news for the government coffers but terrible news for the small business owner, of course I am not advocating that one should not pay their tax. Back in 2018, the government said “(small businesses) are the engine of our economy, fuelling growth and employing 16 million people. That is why, in line with our modern industrial strategy, we have set a challenging aspiration that 33 percent of procurement spend should be with small businesses by 2022”.
Of course, the government did not know the pandemic would hit us in 2020. They would say this is why that aspiration has not been realised. What the government is aware of is that small businesses account for over half of the turnover in the UK private sector. They are the lifeblood of our economy. If we don’t look after them then the economy and ultimately the person on the street will suffer as a result.
According to a report by this is Money HMRC is struggling behind the scenes. There are apparent staffing issues with the chair of the Treasury Committee, Harriet Baldwin MP involved. She raised her concerns in a letter to HMRC about the temporary closure of the self-assessment tax line.
The small business owners that I help say they need relief from the government and HMRC now to ensure that they can survive and then prosper in more stable economic times.
Peter Boolkah is a world-renowned business coach, speaker and entrepreneur who inspires and empowers individuals and businesses to ignite real and lasting change within their companies.