Budget 2013: my top five wish list

Tax-free childcare looks like it will be the headline act in tomorrow’s Budget, but what about the small business community? Brian Palmer, Tax Policy Adviser at AAT and Managing Director of Palmer & Co, shares his top five Budget 2013 wish list

George Osborne hasn’t had the best run-in to this year’s Budget. The 4G auction has come in £1bn under budget and the UK has lost of its AAA credit rating. In short, the Chancellor is going to need quite a few rabbits out of the hat tomorrow lunchtime.

If reports are to be believed, tax-free childcare and the introduction of widespread Wi-Fi and mobile access on trains will grab the headlines tomorrow for their overt aim of boosting the economy. But what about SMEs? Here’s what would I like to see the Chancellor introduce.

1. Cash basis for small businesses

The intention of this legislation proposed in last year’s Budget was to help sole traders and micro businesses with a low turnover to use the cash basis for calculating profits. However, the Chancellor looks set not to permit those with trading losses in a tax year calculated using the proposed cash basis to offset them against their total income arising in the same year.

Instead he will be expecting businesses to calculate their taxable profit under existing rules in which they could claim relief to which they are entitled. This proposal which was heralded as a simplification measure seems destined to be hindered by red tape and is another piece of legislation that adds already to the complexity of the system.

2. Real Time Information (RTI)

The tax system is already complicated and many business owners are apprehensive about the changes to the PAYE system arising out of the introduction of RTI. I’m sure every small business would be overjoyed if George Osborne took notice of the massive administrative and costly burden that many SMEs face as a direct consequence of the changes that are now just around the corner.

It would be great to see changes to the Full Payment Submission requirement of filing ‘on or before’ the time of making payment. Ideally I think the small business sector would benefit if they were given seven days from the day of making payment to make submission.

An even more welcome change would be the dropping of the requirement to lodge a submission on every occasion of operating a payroll in favour of one monthly summary submission. To me, both changes would simplify the operation of payrolls under RTI and would serve to reduce the escalation of administration operators of payrolls will face as a direct result of the implementation of RTI.

Watch Michael Steed MAAT talk about the implications of RTI

3. Increase capital to encourage SME growth

The biggest barrier to SME growth is lack of capital and lending made available by banks. The government and George Osborne have to raise the awareness of other finance initiatives available to the SME market so that entrepreneurs and start-ups feel invested in and we can encourage growth.

4. Approved Mileage Rates

With the cost of fuel reaching record high prices all business owners would welcome an increase in the approved mileage rates.  The ceiling for tax-free payments, or claims against business profits for the use of a personal vehicle, is currently set at 45p per mile for the first 10,000 business miles in a year and 25p per mile thereafter.

5. Capital Gains Tax

Another measure that would be welcomed as an economic stimulus would be the abolition of the 28% rate of Capital Gains Tax suffered by higher rate tax payers on chargeable gain arising from the disposal of non-business assets.  The higher rate charge introduced in June 2010 acts as a brake on holders of non-business assets disposing of them. The easing of the rate would help to free up the movement of capital.

Watch Michael Steed MAAT’s Budget 2013 predictions:

AAT will be commenting live throughout the Budget announcement this Wednesday on its Twitter account. AAT members can also access a range of responses and reactions on a dedicated Budget 2013 page.

Brian Palmer , former tax policy adviser for AAT..