Swindon-based chartered accountants Banks said last week's Autumn Statement had some good news for business, but the devil will be the in the detail.
The firm’s head of tax, Paul Gosling, welcomed the 2% cap on business rates increases, the new occupancy rate relief and the rates discount for small businesses and retailers along with the removal of employers’ National Insurance (NI) contributions for under-21s.
But he said the Chancellor had glossed over some details, such as the proposed clampdown on tax avoidance and evasion schemes.
“There was a lot in the Autumn Statement, but we need to look at the fine print to understand the exact impact it will have on business,” said Paul.
“While some of the announcements were headline grabbing – such as introducing capital gains tax on homes sold by non-UK residents, and individuals who reach pension age before April 6, 2016 being allowed to contribute voluntary NI to top up their pension – there was little or no detail in the speech itself about the effect of some measures on companies and limited liability partnerships.”
Banks hosts a post-Autumn Statement event at their Stratton offices this evening when a panel of experts will give their take on the impact on businesses of the Chancellor’s measures.
The Chancellor had heeded business’s call for a ‘steady-as-she-goes’ Autumn Statement rather than a grab bag of electoral giveaways, said Business West, the organisation behind the Swindon Initiative.
But managing director Phil Smith said he should have been bolder over business rate reform and added: “While Britain’s economy is improving, and our businesses report strong confidence, the UK is still some way from achieving the truly great economy we need.”
He said business would be pleased that the Chancellor has finally acted on business rates bills after years of relentless increases that sucked the life out of businesses in this part of the UK.
“The measures announced to curb business rate increases are positive, but not strong enough to boost companies’ cash flow and investment,” he said.
“The Chancellor should have been bolder, freezing business rates entirely until this pernicious tax can be properly reformed.
“To put this into context businesses in 184,000 premises in the South West will all see benefits from the Government’s actions, and 70,000 premises in the South West will see their business rates bill frozen or falling.”
The upgraded growth forecasts, lower borrowing forecasts, and increased business confidence were all indications that the UK economy was moving in the right direction, he said.
However, restoring stability to the public finances remained crucial to businesses.
“The Chancellor must continue to restrain current spending and prioritise resources on investment in infrastructure and on creating the most competitive environment for wealth creation and enterprise,” said Mr Smith.
“We welcome the measures to address the skills gap and youth unemployment. Businesses and young people in the South West will benefit from Government action to cut employer National Insurance Contributions for all under 21s on earnings up to £42,000.”
This meant employer NICs bills for 139,000 under 21s in the South West would be wiped out from April 2015. Some 37,000 employers in the South West would benefit, resulting in £45m worth of savings for South West employers in the first year alone.
“However, we are concerned that some companies might find it difficult to keep these young people on after their 21st birthdays, when employer National Insurance contributions would kick in,” said Mr Smith.
“We would urge the Government to consider some sort of taper, so that we avoid seeing people who are hired at 18 or 19 let go when they reach 21. A taper would also mean that over-21s are not disadvantaged in the job market.”
Accountants KPMG’s tax partner in the region Julian Cockwell said many businesses would welcome the statement but said the Chancellor could have done more.
“Businesses were the winners with enough positive measures announced to ensure that, if not quite an early Christmas present, the speech was certainly not a turkey.
“There was little tinkering around the edges and some welcome targeted measures to provide relief. In particular the Chancellor has obviously listened to the SME community and delivered on key areas such as skills, business rates and access to finance to help them grow, such as the capping of business rates with specific reliefs for small retailers and an extension of film tax reliefs, plus some allowances for the oil and gas sector.
“The surprise measure though is the removal of employer’s NICs completely for 16-20 year olds. Most SMEs now pay more in National Insurance Contributions (NICs) than they do in corporation tax so this announcement will be most welcomed by the SME sector as it will reduce the costs to business and hopefully in turn support job creation.
“The business community will also be happy with the commitment from the Chancellor to investment in major infrastructure projects and up-skilling our young people, which will in the long turn create an environment for this region’s businesses to compete effectively on the world stage.”
“However, it’s a shame that the Chancellor again passed up the opportunity to introduce tax relief on capital investment which is a measure that many businesses have called for and is arguably the remaining missing piece in the jigsaw to completely transform our corporation tax regime.”