The Spring Budget for 2017 has just been announced, and there are many reforms regarding businesses that Chancellor Philip Hammond guarantees will make Britain “the best place in the world to start and grow a business.”
SMEs have been the lifeblood of Britain for a long time now. They may not be brands known by everybody, but they form a vital part of the economy in the United Kingdom. According to the statistics released by the Department for Business Innovation and Skills, there were 52 million businesses in the UK. Considering that around 99% of the businesses are SMEs, this number is staggering. The Forum of Private Business states that the small and medium-sized businesses make up 15.2 million jobs.
Let’s discuss what these changes are and how they will affect the small and medium-sized enterprises.
The Growth in GDP for the years 2017-2021
After the Brexit referendum on 23 rd June 2016, there was a wave of worry among the businesses, investors and the public due to the decline in GDP. Smaller businesses were more susceptible to this because they have a smaller field of operation and any shock will hit them harder than any huge enterprise. The latter can easily call on investments or loans to balance the effects, while the former has to put in great efforts just to stay afloat in the market.
The Autumn Statement forecast showed that the GDP would decrease in 2017. This added to the uncertainty of the SME owners. However, the Spring Budget 2017 has forecasted a higher growth rate than was predicted. The Office for Budget Responsibility (OBR) reported that the economy would grow faster in 2017, and the growth forecast is updated from the previous 1.4% to 2%.
This rate of growth will help the SMEs to maintain the provision of their service and give them time to prepare for the growth fall that has been predicted for the years 2018, 2019, and 2020. The growth is expected to reach 2% again in 2021.
The small businesses would need to be well-prepared this year for the changes that are about to come.
Making Tax Digital (MTD)
We have mentioned before how MTD is set to be implemented and how it would affect businesses and accountants alike. Consultations were held relating to the common issues that people felt that needed to be addressed and a report was published by the government that outlined many changes, such as simplifying the tax for unincorporated businesses, exempting charities from keeping digital records, and introducing voluntary pay as you go. The Spring Budget 2017 added more details and allowed the small and medium sized enterprises a period of a year to prepare for Making tax Digital (MTD) and to report quarterly. This would help the SMEs get used to the digitised taxation system, and help them make a smooth transition.
The government has mentioned that the tax will be cut down to 19% from April this year. Good news is that it will be slashed further up to 17% by 2020.
This will ensure that the businesses can flourish in the United Kingdom and make the most of the opportunities provided here.
Apart from this, there has also been a clampdown of £820 million on tax avoidance. Proper actions would be taken to stop the businesses to convert their capital loss into trading loss. This will create a healthier, more honest environment for businesses to flourish in.
If you have any queries regarding the Spring Budget 2017 and its implications for your business, feel free to contact our experts at Capium. We would be happy to answer all your questions.