The Chancellor produced a balanced Autumn Statement yesterday that addressed business concerns around rates reform and finance, Bath business leaders said.
Phil Smith, managing director of Business West, which runs Bath Chamber of Commerce, described it as a “crowd-pleasing” set of proposals for business, particularly its pledge for a major review into the “iniquitous and vindictive tax” that is business rates.
“By focusing on key barriers to growth, such as Britain’s broken business rates system and the difficulty of accessing finance for growth, he has shown a commitment to solving problems that hinder the growth aspirations of many firms,” he said.
“Prior to today, businesses asked for help to deal with business rates, infrastructure and apprentices, all of which were addressed in a positive Autumn Statement to close out a year which saw the country finally emerge from a damaging recession.
“This Autumn Statement included many actions to boost small businesses. Over 99% of the 25,000 plus registered businesses in Swindon & Wiltshire are SMEs and further packages of support, such as the expansion of financial support for first-time exporters, increased rate relief and access to finance under the British Business Bank give these firms cause for celebration.”
He said access to credit still remained stubbornly difficult for many small firms, despite several interventions announced since the credit crunch. “So it is too early to say whether the latest steps to encourage further bank lending will succeed,” he added.
“A major coup for business is that the Chancellor has committed the Government to a fundamental review of business rates and doubled small business rates relief for a further year,” said Mr Smith.
“This iniquitous tax is sapping good companies’ strength year after year, long before they make a single penny in profits. In the last week we have seen this evident in the extremes of Black Friday and Cyber Monday, illustrating the competition we see between the high street and online retailers.
“The business rates system has meant that this hasn’t been a fair fight, with one arm of high street retailers held back by this vindictive tax. Today is a step in the right direction and this review must deliver fundamental change and not get bogged down by short term political thinking.”
However, he said there were still fundamental barriers to growth that need to be addressed ahead of next May’s General Election. “With a very difficult fiscal position for UK plc over the next five years, all parties will need to remain focused on making sure economic growth is central to their New Year manifestos,” he said.
Bath accountancy firm Monahans corporate tax partner Dominic Bourquin described it as a “balanced statement, with some small giveaways” for businesses and individuals.
“At a time when there is clear pressure on the Chancellor as the Government overshoots its debt target for the year, George Osborne has brought some slight relief to businesses,” he said.
“The continued doubling of business rates relief for small businesses for a further year together with the cap on the index linked annual increase and £1,500 credit for small retailers is clearly welcome.
“However, the announcement of a review of business rates is progress at last on this inequitable tax, assuming of course that it will not be shelved after the 2015 election. There was a further increase in the R&D tax credit regime for all businesses and with manufacturing the fastest-growing sector of the economy this further support is good news. With fuel duty continuing to be frozen both businesses and individuals should continue to benefit from the falling oil price.
“Any businesses which employ apprentices will not pay employer’s National Insurance on the wages they pay to those apprentices, to further encourage the upskilling of the workforce.
“For individuals, the Chancellor trailed a slight increase in both the personal allowance and ISA limit from April 2015, with those that inherit ISAs being able to preserve the tax free status of the inherited ISA – a nod to those who have “saved hard”.
In summary, a balanced statement, with some small giveaways, but given the age of austerity in which we all now live this is to be expected.”
Malcolm Emery, partner at Bath law firm Thrings and a dual-qualified chartered tax adviser and solicitor, said with 3% growth suggesting the UK economy was continuing to perform solidly, the Chancellor could have taken the opportunity to improve the UK’s export capability by reducing the standard rate of VAT.
He also questioned the targeting of non-UK domiciled individuals – or non-doms – resident in the UK.
“While the current tax system offers such individuals benign tax status, the introduction of new tax charges needs to be carefully balanced,” he said.
“People with non-domiciled status in the UK contribute significantly to our nation’s economy, and there is a risk that punitive tax charges could prompt an exodus of talented and wealthy individuals and business owners from the UK.”
Proposals that corporate tax dodgers would now have to pay tax on the UK profits they would otherwise move offshore is likely to be welcomed by large sections of the local business community, he said.
“Mr Osborne has sought to generate more revenue for the treasury deficit, a timely move as the Government commences its preparations for next year’s General Election,” he said.
Accountancy firm Bishop Fleming, which has an office in Bath, said the Autumn Statement had dealt with two of the hot issues on its wish-list.
Managing partner Matthew Lee said: “We called for a total re-think on Business Rates: The Chancellor announced a 2% cap on annual increases for this iniquitous tax that is unfairly based on inaccurate property values and unfairly guaranteed to rise by being uniquely linked to inflation, rather than being linked to business performance.
“He did announce the root and branch review we want, but not for some years. Meanwhile, UK businesses pay vastly more in business rates than any EU competitor.
The firm had also called for a re-think on Stamp Duty for house purchases.
“On this one, the Chancellor delivered almost everything we wanted to see, by removing the distortions created by the way differing price bands were applied,” said Mr Lee. “This could prove to be the most important item in his Autumn Statement, because it removes one of the biggest barriers to getting the housing market moving.
“Unfortunately, this announcement also included a back-door introduction of the Mansion Tax by boosting Stamp Duty on homes valued above £1.2m, which could hit the innocent owners of high-value homes.”
Although the Chancellor did not deliver other items in Bishop Fleming’s wish-list, like scrapping auto-enrolment pensions for small employers, merging income tax and national insurance, and restoring VAT to 17.5%, the firm did welcome other measures to help businesses to boost investment and jobs.
“Many businesses in this region will benefit from the increased research & development tax credits, the extension of lending to small businesses, and the abolition of NI for apprentices", said Matthew Lee.
EEF, the manufacturers’ organisation, said the Chancellor had been right to place his emphasis on boosting productivity and the long-term resilience of the economy.
EEF South West director Phil Brownsord said: “He rightly said manufacturing is leading growth and firms will welcome positive step in making the UK a centre for innovation, with measures including the strengthening of the R&D tax credits and cutting tax on young apprentices.
“The investment in science and the boost for infrastructure are also helpful measures on the road towards rebalancing the economy.
“However, ultimately manufacturers would have liked to have seen greater levels of funding and longer-term commitments to spending on innovation.”
David Mackenzie, residential partner at the Bath office of property agents Carter Jonas, welcomed the Stamp Duty reform.
He said: “This is certainly a fairer and more fluid way to have the Stamp Duty work, and will have great impact at the properties that were previously affected over £500,000 and £1m marks.
“It will have a positive impact on the lower end of the market and a negative impact on the upper end, creating a squeeze in the middle, so it will be interesting to watch how this reacts. It just remains to be seen whether a ‘mansion tax’ could also be included after the next General Election, which will of course stall the top end markets.”
