Tax reform and VAT cuts demanded ahead of Autumn Statement
With the Autumn Statement fast approaching, chancellor Philip Hammond has been hit with a series of small business recommendations ahead of his economic forecasts for Britain on 23 November.
Tax reforms, including a reduction in VAT, have been hailed as crucial measures in responding to the declining value of the pound and economic uncertainty as a result of the Brexit vote.
The Association of Certified Chartered Accountants (ACCA) is one body that has urged the chancellor to bring in significant tax reforms that would benefit the owners of small companies.
Chas Roy-Chowdhury, head of taxation at ACCA, urged the chancellor to consider major reforms in areas such as inheritance tax, global tax avoidance and the annual investment allowance.
Crucially for small firms in Britain, Roy-Chowdhury highlighted the “real concerns” held by business owners over the Making Tax Digital (MTD) initiative, and called for the chancellor to defer the switch – due in April 2018 – and introduce a 21-month trial period of online self-assessment tax returns.
The ACCA also proposed the extension of the VAT registration threshold for small businesses – increasing it to include companies generating £100,000 in turnover.
Roy-Chowdhury argued that government had a responsibility to “make life easier” for the country’s smallest firms, and increasing the threshold by which business owners are required to pay VAT would cut red tape and give back time and resources spent on tax administration.
He said: “Small businesses exist first and foremost to make profits, and the government should be doing everything it can to help them focus on that goal.
“Micro businesses in particular are spending hours reading HMRC guidance, struggling with unfamiliar software and counterintuitive rates, limits, thresholds and exemptions, and this is restricting their output and productivity.”
Following a new survey into consumer spending expectations, commercial insurer NFU Mutual has highlighted to the chancellor the value of a reduction of VAT to the UK economy.
The research suggested that a five per cent cut in VAT – currently at 20 per cent for standard goods and services – could drive an increase in consumer activity in the UK worth a potential £19.3bn to the economy.
The VAT reduction would, according to the insurer, give the average adult in Britain an extra £547 to spend each year, while the prospect of cheaper goods would lead 67 per cent of consumers to make more purchases.
Commenting on the research, Paul Shattock, commercial sector specialist at NFU Mutual, spoke of the “encouraging signs” in the willingness among consumers to put more into the economy, and advised the chancellor to consider cutting VAT to counter the impact of inflation.
“With consumer spending coming under some pressure from rising inflation, the chancellor’s decision to ‘reset’ fiscal policy could possibly include the option of cutting VAT by as much as five per cent to support growth,” he said in a statement.
“Our research suggests that even in a more probable situation of a one per cent cut, up to £3.9bn could be ploughed into British business. With other announcements such as increased infrastructure spending seen as more likely, whether this opportunity can be delivered to customers and benefit UK businesses remains to be seen.”
If VAT were to be cut, survey found over half of respondent consumers would increase spending in the country’s hospitality industries – currently threatened by residence rights of European workers – by taking more weekend holidays in the UK and more frequent visits to restaurants.