Jeremy Thomson-Cook said: “Talk of a Brexit dividend and its uses for the NHS will likely dominate the agenda, but the focus of small businesses will be on issues that affect their bottom line in the here and now. Our top three potential issues for SMEs off the back of the Budget include the following.”
The ‘Amazon tax’
E-commerce giant Amazon’s latest accounts showed that the business paid around £4.5mn in tax against a profit of £72mn in the UK in the last year—a marginal rate of 6.25%. In the high competition, low margin environment of retail, many SMEs would love access to the accountants who made this possible.
However, Tesco’s Dave Lewis has argued for an additional 2% tax on goods sold online to help keep the High Street alive. This is, of course, the year that has seen House of Fraser, Maplin and Toys ‘R’ Us all go to the wall, and while not all of this can be attributed to the Amazon effect and wider e-commerce trends, the High Street is changing far too quickly for a lot of retailers.
Nonetheless, the issue remains that there is little, if any, ‘first mover advantage’ in levying such a tax without international consensus, something that Chancellor Hammond touched on at the Conservative party conference earlier this month.
SMEs that sell online, including those who use Fulfilled by Amazon logistical solutions, will be looking for clarity on whether this tax will have an impact on them or just the juggernauts of the e-commerce space—particularly as a blanket tax of even a few percentage points would only further hammer their margins.
Business rates are a dull instrument that have been banging on small and medium sized businesses for too long and are simply not fit for purpose.
A tax on a property’s ‘rateable value’ set centrally, but paid locally allows no flexibility for local authorities to levy what they think fair and equitable for their business constituents. It also happens to be one of the few direct taxes that is levied with no forethought as to the business’ ability to pay.
In the current post-vote, pre-Brexit world wherein the UK is desperate to attract investment from businesses who can take advantage of our well-educated, highly-skilled workers, what could help more than cutting out some of the most onerous business taxes in the G7?
On current calculations business rates are set to rise by 2.4% by April with SMEs left wondering just where the money is set to come from. A centralised tax targeting businesses based on their premises is an ineffectual albatross around the neck of some of Britain’s most important employers and many will be looking to the Budget to see change in this area.
Though the Budget is undoubtedly a key date for business diaries every year, we cannot put aside that there is a huge amount of change coming down the pipeline for the UK economy as a whole in the next 12 months.
We have to think, particularly in the event of a no-deal Brexit, that emergency measures will be enforced and decisions may be made on an immediate basis.
One of the key arguments surrounding the potential for a Norway-style Brexit followed by a Canadian-type arrangement is that businesses would rather just the one regulatory shift, rather than a slew of wholesale changes upsetting the apple cart. The UK’s SMEs have enough going on as it is at the moment.
Business planning, especially contingencies to protect business operations against something as all-encompassing as Brexit, take time to finesse. With that in mind, it is vital that SMEs trading internationally start getting plans in motion to ensure that their budget rates are set, they have agreed terms with suppliers and they will have access to the right markets moving forward.
A lot will change on Brexit between now and the end of the Article 50 period, not least as a result of both EU and UK political positioning. SMEs can ably ride out some of that change by ensuring they are as prepared as possible and being ready to act as soon as the deal terms are laid down.