With the Chancellor having just taken to the dispatch box for the third time in a year, the Spring Budget is hardly the grandstand event that it once was, especially given the rise of important announcements made in the Autumn Statement, (formally the Pre-Budget Report, 1997-2009) and last summer’s “Emergency Budget”.
Especially given recent market turmoil and the growing uncertainty of the EU referendum, his speech was expected to be somewhat short of controversy or surprises. The cut in Capital Gains Tax, the new Lifetime ISA and the new sugar tax provided a hat-trick of rabbits out of the hat which will steal the headlines.
The UK’s 2.25 million SMEs will take some comfort from the announcement that small business rate relief is to be permanently doubled, with 100% relief for businesses with properties that have a rateable value of £12,000 or less. In addition, they will benefit from the lowering of corporation tax to 17% by 2020, along with the switch of business rate increases to be in line with the Consumer Price Index, which is typically lower than the Retail Price Index and expected to deliver savings of £1.6 billion over the next five years.
However, and in spite of the continuing historically low rates of interest, there’s still little desire from many SMEs to spend and invest in their longer-term future. In fact, the latest statistics show small businesses are holding £164 billion in current and deposit accounts, a seven per cent rise on the previous year, demonstrating how they are fearful for the short-term economic prognosis, and are guarding against this through greater cash holdings.
There are, nevertheless, a number of funding initiatives, in addition to maintaining strong cash reserves, available and companies should consider whether their current cash-rich financial situation might allow for expansion. The hiring of apprentices, of course, can itself provide valuable business assets when they are provided with the right opportunities to become skilled.
Despite the positive news for apprentices in respect of a 10p increase in the minimum wage in from October 2016 – in line with recommendations from the Low Pay Commission – and the increase in the personal allowance to £11,500 from April 2017, apprenticeship schemes need more consistent support and not just a burst of publicity during this week’s National Apprenticeship Week. Government needs to incentivise businesses of all sizes across a range of industries, giving apprentices access to high quality training schemes that tackle the current skills shortage and truly provide a talented and motivated UK workforce for Osborne’s ‘Next Generation’.
Brian Palmer is the tax policy adviser for AAT.