Relieving the tax burden should be a priority of the next government, the FSB says

The Federation of Small Business is calling for reforms to ease the tax burden on small businesses as part of a package of “pro-growth, pro-business policies to stimulate the economy and encourage entrepreneurship.”

The call follows the FSB’s latest Small Business Index (SBI) for the first quarter of 2024, which shows that a record number of small businesses in the North West expect taxes to be a major drag on growth in the coming year.

While the overall confidence score recovered from -9 in the previous quarter to +5, heralding the end of the recession, more than a quarter (26%) of small businesses in the North West cited taxes as their top concern going forward.

This is the highest ever score for tax burden in the region since the inception of the SBI in Q4 2014. For context, the next highest score for tax was 25% in Q3 2015 and the North West average over this period is 15%. The other key issues mentioned were conditions in the domestic economy (62%), consumer demand (33%) and labor costs (28%).

In addition, the FSB has criticized HMRC’s level of customer service as urgently needing improvement, following a National Audit Office (NAO) report showing that almost half of all calls to HMRC go unanswered.

FSB Merseyside and Cheshire’s Phil McCabe said: “The owners of Britain’s 5.5 million small businesses will be looking closely at which party puts forward the most compelling pro-growth and pro-business policies to boost the economy and entrepreneurship to encourage. They form a large and motivated part of the electorate. Another 16 million voters work at small businesses.

“We need a compelling plan to drive down the cost of doing business, support small businesses to grow and create the right conditions to encourage new businesses to start up. Tax reform must be a cornerstone of this plan.

“Or research shows that the tax burden for Northwest businesses is at a record high, and tax compliance is another major problem – the long delays, the difficulty in getting through and the struggle to talk to someone who can actually help instead of reading from someone else. script adds to the stress for small business owners who have received letters from HMRC saying there is a problem with their taxes.

“We have previously criticized HMRC’s ‘guilty until proven guilty’ approach to its communications with small businesses, which can cause entrepreneurs to panic. Every minute that they are unable to reach someone who can help them resolve matters means more worry and anxiety. That’s why investment in HMRC’s customer service is so important.

“Digital support options certainly have their place, and many small business owners like to take advantage of them. But there are times when talking to a real person is the only way to get something straight, especially with questions that are anything but completely simple.

“The UK tax code is ten million words long, and it is impossible for small businesses to match the in-house tax and financial expertise of their larger rivals. As well as improving customer service, HMRC must focus on ensuring that the guidance it provides is clear and as easy to digest as possible.”

In the Chancellor’s Spring 2024 Budget, the FSB successfully campaigned on tax in a number of areas: securing an increase in the VAT threshold, a reduction in national insurance for the self-employed and commitments to reduce the amount of HMRC related administrative burden.

Previously, FSB campaigns have alerted the government to the threat to many small businesses of potential increases in business rates, or of short-term reliefs coming to an end just as cost pressures really began to mount. This led to an extension of the 75 per cent exemption for small businesses in retail, hospitality and leisure in England – a sector that the SBI has consistently shown is feeling the pressure particularly hard. The Chancellor also confirmed that there would be no annual inflation-related increase in business rates for businesses not already covered by the small business rates relief.

The FSB has also successfully campaigned to protect a planned reversal of a 1.25 percent increase in National Insurance Contributions (NICs) for employers, employees and the self-employed, and has spoken out on behalf of the directors of public limited companies an equivalent arrangement had been achieved. reversal.

An employer National Insurance (NI) discount for those leaving military service, originally underwritten by FSB in partnership with X-Forces Enterprise, has been maintained. Furthermore, the NI Employment Allowance – a government initiative that allows eligible employers to reduce their NI liability – was maintained at the increased level of £5,000, an increase that followed a successful FSB campaign.

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