- Why ‘there’s not much good news in the Autumn Statement for small business owners’
- The decision to shut down the VAT Flat Rate Scheme will have a ‘detrimental’ impact
Ed Molyneux, CEO and co-founder of FreeAgent– who provide award-winning cloud accounting software for freelancers, micro-businesses and their accountants – said:
“There’s not much good news in the Autumn Statement for small business owners – and especially for contractors. Despite the Chancellor announcing more funds to develop management skills, a rise in venture capital funds through the British Business Bank and an increase in rural rate relief, there’s actually very little to be cheerful about.
“In particular, the decision to shut down the supposedly-inappropriate use of the VAT Flat Rate Scheme by introducing a new 16.5% rate from 1 April 2017 for ‘businesses with limited costs, such as many labour-only businesses’, is likely to be detrimental for many contractors across the UK. It will essentially mean an increase in the amount of VAT that those businesses have to pay.
“And among the announcements buried deep within the Autumn Statement document is a restructuring of off-payroll working rules in the public sector, which could be very bad news for contractors working with government organisations. It’s essentially a change to IR35 but my preference would have been to abolish that legislation completely – as it has a real, detrimental effect on small businesses and IT contractors who run their business as a limited companies and take short-term contracts – and replace it with simpler, more robust and fairer rules around small businesses’ employment status.
“In addition, the announcement that tax breaks on employee share status will be abolished is likely to be a blow for ambitious small businesses – as will the announcement that employees will no longer be able to sacrifice their salary in order to pay lower tax on benefits in kind.
“I would have preferred to see more information about the government’s Making Tax Digital plans, greater powers for the small business commissioner to tackle late payments and less red tape for micro-businesses and contractors to deal with when it comes to their tax.”