Most running a small business would have been relieved in May this year, when they would have expected a government to be taking power who was very much supportive of Entrepreneurs and pro enterprise and small business. In fact the Conservative manifesto seemed very much aimed at providing support to this important economic contributor to society.
To put it in context some statistics from the FSB confirm that 15.6m individuals are employed by SME businesses in the UK, which accounts for 60^ of all private sector employment. This sector also contributes over £1.8 trillion in annual turnover, a significant boost for GDP.
Personally and as Managing Director of Inspire, that represents Entrepreneurs, I am very much concerned with the current approach being taken by the Government in what appears to be a move to see the entrepreneurial and small business sector as an easy target to increase taxes.
So what has been announced since May 2015:
- An increase from April 2016 in the taxation on dividends, effectively a tax increase of 7.5% on all dividend income taken from a company.
- A significant increase in the national minimum wage as it becomes the National Living Wage. Effectively the replacement of tax credits paid by government to cost incurred by businesses.
- The withdrawal of the Growth Accelerator programme from April 2016. This has been a useful source of grant funding to enable businesses to seek training and development to assist their growth ambitions. Although there may be some form of replacement, small businesses who have just got used to this programme will need to learn about a whole new set of hurdles they need to overcome to get access to the funding.
- Reference being made that quarterly rather annual reporting of profits may need to be made by all businesses in the future. Hardly a reduction in red tape!
This is all in the last seven months and to this you need to add the obligations that will effect a great number of smaller business in 2016 in respect of auto enrolment, an increase in Employers National Insurance in all but name. I am really starting to worry what is next!
Hardly a positive environment to be operating an Entrepreneurial business. All business owners and entrepreneurs take risks and make personal sacrifices in order to generate income and profits and there needs to be sufficient advantage to them in doing so. With the increasing red tape and an ever increasing tax burden is that incentive to grow and develop their business being removed. If this does become the case then it is the UK’s economy that will ultimately suffer.
Personally I think this is the effect of a weak opposition on the front benches and a labour party in disarray. We have a Conservative party that can really do what they want when they want and are acting in a short term mentality towards the entrepreneurial sector accordingly simply to increase taxes. As a result I am afraid the Entrepreneurial sector could be in for more tax rises and red tape in the years ahead.
The cynic in me also believes that this is done in the knowledge that the Entrepreneurial mind-set, when faced with increased costs or the challenge of a more penal tax regime, is to just dig in and work harder as we strive to succeed and pay our their taxes. If employees generally had been hit with a 7.5% increase in taxation just ponder what the reaction may have been? When the Government tried to extract further taxation from large corporations and financial institutions they simply started to say they would reside, for tax purposes, elsewhere in the world. The government backed down!
Whatever your political leanings, I do think that all that run an entrepreneurial business have a responsibility to have our voice heard and not simply accept the current focus on penalising the entrepreneurial business sector.
I believe that all entrepreneurs and entrepreneurial businesses should be making their voices heard through representative organisations such as the IOD, business chambers, FSB and also making personal representations to our MP’s. I and Inspire will certainly be doing this on our client’s behalf and I would recommend that you all do the same.