Business concerned over plans to scrap entrepreneurs’ relief
Chancellor Rishi Sunak’s plan to scrap entrepreneurs’ relief in the Budget has been criticised by businesses, with it suggested that removing the £3bn of tax breaks could harm start-ups. Mike Cherry, chairman of the Federation of Small Businesses, said cutting the incentive would see the majority of firms who benefit losing around £15,000 each year. He said: “Scrapping entrepreneurs’ relief would make a mockery of the idea that it’s ever sensible to build up a business rather than invest in property, land or secure a gold-plated pension.” Mr Cherry added: “Everyday entrepreneurs throughout the country who are about to retire will be left permanently poorer by this change.” Adam Marshall, director general of the British Chambers of Commerce, said abolishing the relief – which lets entrepreneurs sell parts of their business and pay a 10% tax on any profits instead of the normal 20% levy – would be a “negative signal to businesspeople who take risks and invest upfront to grow a business over time.” He added: “It’s one thing to make the relief more targeted, but quite another to scrap it altogether.” The FT says the issue was raised in WhatsApp groups involving Conservative MPs, with one asking: “If we aren’t backing entrepreneurs, then who are we for?” Matt Kilcoyne, of the Adam Smith Institute think-tank, comments: “The entrepreneurs’ relief is a policy that is based on good, solid Conservative values, so it seems strange for Rishi Sunak to put a tax on ambition.”
Source: The Daily Telegraph (01/03) Financial Times (01/03) The Times (01/03)
Freelancers given a year to get used to tax shake-up
The Treasury will not punish freelancers facing tough new tax avoidance measures for any mistakes on their returns for 12 months. With IR35 rules due to come into force on April 6 set to make medium and large businesses responsible for setting the tax status of contractors they hire, Chancellor Rishi Sunak has said that businesses and contractors would not have to pay penalties for errors in compliance in the first 12 months “except in cases of deliberate non-compliance”. Julia Kermode, the chief executive of the Freelancer & Contractor Services Association, says that with the general election delaying HMRC’s education programme, “a number of businesses are only finding out about the reforms and their new liabilities now, weeks before they take effect.” An inniAccounts study looking at the potential impact of the new rules, which are designed to tackle disguised employment, shows that 70% of 350 organisations polled were no longer willing to use contractors.
Source: The Times (29/02) Financial Times (29/02)
MP warns over scrapping IHT exemption
With Chancellor Rishi Sunak believed to be considering scrapping the 100% inheritance tax exemption for farmers passing on land in his Budget, John Stevenson MP has warned that doing so could lead to an increase in aggressive avoidance schemes. Mr Stevenson, head of the all-party parliamentary group on inheritance tax and intergenerational fairness, commented: “Just cutting the exemption and leaving the rate unchanged would be quite harsh and farmers wouldn’t take it lying down.” Mr Stevenson has called for a full-scale review of the death tax.
Source: The Sunday Telegraph (01/03)
Lending figures set to rise with return of confidence
The amount of peer-to-peer and other marketplace lending to SMEs fell from £2.37bn in 2018 to £1.9bn in the first nine months of 2019 while equity investments were also down from 2018’s figure of £6.7bn to £5.5bn. According to the latest 2020 Small Business Finance Markets report from the British Business Bank, lending from banks to SMEs was also down by nearly 2% year-on-year at £57bn compared with £58bn in 2018. Matt Adey, director of economics at British Business Bank, adds that business confidence was very low in 2019 but since the election, surveys suggest it is ticking up. “That will translate into investment plans,” he said. “There’s the prospect of things improving but that will take time to come through.” Over the last five years, peer-to-peer business lending volumes have risen by 374%, the BBB added.
Source: Growth Business (27/02) P2P Finance News (27/02)
Only 1 in 3 SMEs has coronavirus plan
The Federation of Small Businesses (FSB) has warned that just a third of small businesses have a plan in place to deal with disruption that may arise from the coronavirus outbreak. The FSB has urged firms to consider how they would handle disruption to supply chains, employee absences, issues with cashflow and the impact of travel restrictions. It also advised firms to check insurance policies, warning that they “may not include any protection if your business suffers due to an outbreak of disease, regardless of circumstance”.
Source: The Times (03/03)
Coronavirus threat may require Budget plan B
Experts have suggested that Chancellor Rishi Sunak will have to rethink his Budget over concerns that the spread of the coronavirus will trigger a global economic downturn. Paul Johnson, director of the Institute for Fiscal Studies, said economic forecasts drawn up by the Office for Budget Responsibility (OBR) may not paint a true reflection of the climate, saying: “Whether the OBR has had time to include the likely impact of the virus into its forecasts or not, the Chancellor will need to say how it creates further uncertainty.” Former Treasury minister David Gauke comments: “Given the uncertainties, the OBR is likely to qualify its economic forecasts,” adding that the “health crisis … makes all short-term economic forecasts a matter of guesswork.” Lord Wood, who worked on six budgets as an adviser to Gordon Brown, offers that the Treasury “may have to rip up the plans its budget has been based on and hastily assemble a new plan B, to ensure the Chancellor’s statement on 11 March fits the situation we are in.”
Source: The Guardian (02/03)
One in five will retire with less that they thought
A survey by the Association of British Insurers has found that as many as 19% of savers could retire with smaller savings than expected because they do not review information about their pensions. The findings come as Parliament prepares to debate the Pensions Schemes Bill, which would legislate for the introduction of a “pensions dashboard” – a digital service allowing savers to see details about all their pension savings in one place.
Source: The I (27/02)