The Spring Statement brought a crackdown on late payments that affect four out of five small businesses and leads to the closure of 50,000 a year, according the Federation of Small Businesses,
The UK’s business community wasn’t expecting much from the Spring Statement amid the dizzying ongoing Brexit saga, but there were a few notable tidbits to report.
Alongside the late payments move came news on penalties for failing to meet Making Tax Digital requirements and news on apprenticeship funding.
The biggest takeaway from the Spring Statement is the introduction of the requirement for company audit committees to report late payment practice
The Chancellor of the Exchequer Philip Hammond told MPs that company audit committees will now be required to report late payment practice in the annual report and accounts.
The Government has decried late payments to small and medium-sized enterprise suppliers in the private sector, even going as far as launching a call for evidence at last year’s Spring Statement in a bid to tackle the issue.
This followed the introduction of a measure in April 2017 forcing all large UK companies to publish specific information regarding their payment policies, practices and performance – including the average time taken to pay supplier invoices – twice yearly.
Praising the initiative, Mike Cherry, national chairman at the FSB, said: ‘The end of late payments could finally be in sight. It can’t come soon enough, to bolster small businesses at a time when they are in great need of support and a lift in confidence.’
The Chancellor also revealed that a £700million package to help SMEs invest in apprenticeships will be rolled out next month.
The initiative, which will see the amount SMEs will have to contribute towards apprenticeships cut from 10 per cent to 5 per cent, was announced in the Autumn Budget but no fixed deadline was set at the time.
The reform also lifts the limit on transferring funds to other organisations in the apprenticeship service from 10 per cent of total funds to 25 per cent.
Tax abuse crackdown continues
The Chancellor also announced a consultation to prevent the abuse of the research and development tax relief for SMEs, which allows qualifying firms to claim a 230 per cent deduction on qualifying R&D expenses as a tax credit.
In other words, a £100 worth of R&D expenses will help a business cut £230 from its annual net profit before taxes, thus reducing its overall tax bill.
The Chancellor of the Exchequer delivered the Spring Statement earlier today
Companies with fewer than 500 employees, annual turnover under €100million or a balance sheet total under €86million are eligible for the small and medium sized enterprises R&D tax credit scheme.
‘Light touch’ on Making Tax Digital penalties
The written statement released after the Chancellor’s speech revealed another nugget of information of significance to many small businesses.
The seven-page dossier revealed the Government will adopt a ‘light touch’ approach to penalties in the first year of the Making Tax Digital (MTD) initiative.
The mandatory digital record keeping for VAT for businesses over the VAT threshold (with turnover over £85,000) comes into force from 1 April.
Where businesses are doing their best to comply, no filing or record keeping penalties will be issued, according to the document.
The focus will be on supporting businesses to transition and the government will therefore not be mandating MTD for any new taxes or businesses in 2020.
Business leaders: Hammond is hamstrung
Rain Newton-Smith, chief economist at the CBI, called the moves ‘an admirable attempt to set out a long-term vision for the UK economy’ but claimed Hammond ‘remains shackled by Brexit’.
She said: ‘Prompt payment practices are good for businesses throughout the supply chain, so if reporting encourages better behaviour from firms that should be welcomed.
‘However, going it alone on a digital services tax [confirmed in today’s statement] is high risk, especially at a time when the UK already looks increasingly isolated. The EU has dropped their plans and got behind the OECD’s efforts – the UK should follow suit.
‘The government needs to be doing all it can to encourage investment in the UK and adoption of new technologies, not putting up barriers.’
Mike Cherry added: ‘Poor payment practices by big businesses towards their smaller suppliers are rife and pernicious, leading to the closure of 50,000 small firms a year.
‘Four out of five small businesses have been paid late, and we told the Chancellor that today was the moment to act, to tackle this scourge once and for all.
‘The commitment from the Chancellor that the Business Secretary will see this through is welcome, and we are especially pleased that the first measure has been announced – to make a non-executive director responsible for the supply chain through the audit committee of every large business, and to report back through the annual report on their progress.
‘The end of late payments could finally be in sight. It can’t come soon enough, to bolster small businesses at a time when they are in great need of support and a lift in confidence.’
Emma Jones, founder of small business support group, Enterprise Nation, said: ‘Because of the political context, it was always going to be doubtful how insightful or useful this year’s Spring Statement could be.
‘The takeaways for small firms were a commitment to making companies report their late payment practices, help with taking on apprentices, the abolishment of paper landing cards for overseas nationals and a review into how to make the UK’s tech community more diverse through competition rules.
‘A closer look at the written statement revealed a soft touch approach to the introduction of Making Tax Digital next month, with no penalties issued in the first 12 months.
‘We welcome these, but they are unlikely to convince the millions of small firms grappling with Brexit uncertainty that the UK’s political system is operating in an effective manner, all things considered.’
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