SME Specialist Welcomes Attempt To Alleviate Small Business Cash Flow In PBR – But Not Much Else
Today’s Pre Budget Report was a mixed bag for small businesses – with as many negatives as positives, according to a Norfolk-based firm of chartered accountants and business advisers which specializes in advising the SME sector.
Murray Graham, managing partner of Banham Graham, commented that there was more than a whiff of ‘tax tokenism’ in some of the announcements made this afternoon.
“There are some positives for small businesses to take away from this afternoon’s statement,” he said. “The cash flow implications of being able to spread income tax, corporate tax and VAT payments will be helpful for small firms for whom cash availability is the big issue at the moment.
“We also welcome the attempt to alleviate the squeeze on credit for small businesses through the proposed Small Business Finance Scheme. We need to see more detail of how it is going to work, but anything which improves the availability of finance for small businesses is going to have a positive effect on the economy.
“That said, the headline-grabbing cut in VAT will have a minor effect for retailers, in our view. Many have already made price adjustments to ensure they are competitive, and it’s unlikely that the whole VAT cut will be passed on to consumers. Even if they are, it’s a very small saving in the overall cost of any good.
“It’s possible that consumers may feel the benefit through reduced utility bills and other expenditure where VAT is added after the actual cost is calculated – but for small businesses that benefit will be more than outweighed by the increased bureaucracy caused by changing the VAT rate halfway through a VAT period. Businesses will have to be very careful not to make calculation mistakes, and should seek qualified advice to avoid penalties if they do.
“On top of all of this, the tax bombshell of an increase in National Insurance means that the Chancellor is giving with one hand and immediately taking away with the other. Increasing NI rates is a tax rise in all but name, and it will affect most small businesses – and many employees.
“This is all compounded by what Vince Cable has called the ‘tax tokenism’ of a modest increase in the top rate of income tax for very high earners. This won’t raise much revenue, and has mainly been done for political purposes to appease the Government’s own backbenchers.
“All in all there are more politics than economics at play here – we believe that small businesses are going to be in for a very rough ride over the next 12-18 months. They need to be aware irrespective of the promise of help from the Government, businesses need to get themselves into as good a shape as possible in terms of cash flow, forecasts and reporting, to ensure they have the best chance of survival.”