FSB understands that this is an emergency budget for emergency times and that difficult decisions have to be made to tackle the debt, it has urged the Chancellor to temper this with measures which will inspire confidence in the future and allow businesses to innovate, grow and employ.
There is a distinct possibility that VAT will be increased. If this is the case, the FSB urges the Government to recognise that a decision on timing is vital for small firms’ cashflow. The move to reduce VAT to 15% in 2008 cost the average small business £1,500 in administration alone.
Small businesses do not have the financial buffers available to be able to absorb an increase in VAT as big businesses do. The FSB has urged the Government to include a sunset clause which would allow small firms to plan for the eventual reduction and send a strong message that while tax increases are necessary in the current climate, that this Government is a low tax administration.
The FSB also opposes any major increase in the Capital Gains Tax (CGT) for businesses and entrepreneurs as it would stifle long-term investment in small firms. The FSB believes that CGT on business activity should remain at 18% and a generous taper relief be reintroduced to help savers and long-term investors.
A fifth of small firms believe that National Insurance Contributions (NICs) and PAYE taxes are their biggest obstacle to growth. Given this, the FSB is arguing that while it is important that the Government cuts the deficit, something that over 90% of FSB members agree with, it must not be at the expense of the recovery or mean a hike in taxes for small businesses.
To encourage small firms to employ staff and grow, the FSB urges the Government to go beyond the Conservative manifesto proposal to cut employer NICs for new companies only. The need to pay NICs should be negated for existing firms in addition to start-ups.