Mike Smith provides brief insight into the Budget and some of the implications for UK SMEs
The 2014 Budget speech was a lengthy one and overall as far as SMEs are concerned there were one or two highlights in the export and manufacturing areas, in particular. The Chancellor was trying his best to get the larger companies to loosen their purse strings by doubling the annual investment allowance to £500,000 and hopefully it will do the trick. The sooner we can get the larger companies investing in the UK – the better it will be for everyone.
The move to force the banks to refer those businesses that have been turned down for loans to alternative lenders is a very radical move and may motivate the banks to act, finally… As someone who has been advising businesses for over thirty four years I see the damage done first hand on SMEs, inflicted by poor banking practices. Not all the banks are bad of course and not all the staff are poorly trained and demotivated, but unfortunately there are sufficient numbers of both to do real harm to UK businesses.
The ability of the banks to lend and the treatment of SMEs will no doubt be commented on with the FSB and BCC’s motivated Business Banking Insight programme which will identify just how well, or poorly the banks have performed. The results will be published on their website. It is a step in the right direction to remind banks that they should be providing a service to businesses and not be blinkered purely towards sales targets.
The new increased powers for HMRC to seize money that is owed to it concerned me slightly as my experience is that the power can sometimes be abused where no accountability is in place. Responsibility and accountability go hand in hand and unfortunately in the past HMRC have not proven themselves to be good at identifying ether. I understand that they have a very difficult job to do and often under very difficult circumstances, but tax avoidance is legal in this country and there is a clear distinction between avoidance and evasion, the latter being illegal. Of course I am all for hitting Google, Amazon and Facebook who clearly indulge in huge avoidance schemes; my concern is having opened this door, can we ever close it? I am just hoping the ability to seize the money from a bank account is not extended to SMEs who owe self-assessment? Corporation tax? Where do we draw the line and will there be a clear definition of what is determined as ‘avoidance’ and who makes this decision? We are placing an awful lot of faith in an under-resourced body that will, in effect, become Judge and Jury; despite HMRC doing a good job under their current circumstances, this would be a hard task for any organisation to handle in terms of management and control, even with sufficient resources at their disposal.
Pensions have always been of interest to the entrepreneur, or at least they should have been and I was very impressed at the radical reforms being put in place. Nobody should have the restrictions placed on their hard earned money that were in place and these reforms will go a long way to easing some of the challenges of retirement. If I was cynical I would say that when you look at the savings changes that these reforms will bring and who they are aimed at; they appear to be targeting the very people who vote UKIP in an effort to get them onside, but frankly I am not concerned. These pension reforms have been badly needed for quite some time and anything that allows for more flexibility surrounding how I manage my money, I am all for it. Being forced to take an annuity was the only choice available for the majority until now, unless you had access to specialist advice.
Although the economy has improved, the business sectors still need a lot of help and overall there were some indications that this chancellor is listening and the one area that should have been tackled, but wasn’t, was the area of business rates. Whilst Osborne appeared to acknowledge there is a problem by extending the £1,000 business rates relief, this is only tinkering with a broken model. Business rates are an insidious, flawed revenue raising model and the area is in desperate need of reform. Whilst an extension is welcome, this does not go anywhere near enough and it would be great to see a radical review at the next budget. Why not assess business rates on a more realistic basis such as turnover, or sales? Reform may come next year in time for the Election?