Firms across the country are bracing for a week of new cost increases and reporting requirements, with the Federation of Small Businesses (FSB) calling on government to support those impacted and rule out the introduction of fresh burdens.
Two million small businesses will be hit with new reporting requirements due to Making Tax Digital (MTD) programme from today.
HMRC is forcing VAT-registered businesses to comply with its MTD initiative, with the software required to meet MTD obligations alone set to cost small firms £564 each on average, according to the FSB.
The FSB said it was “blue Monday” for firms as up to 500,000 businesses are to be landed with fresh business rates hikes as the third year of the revaluation period starts.
Mike Cherry, national chairman of the FSB, said: “This truly is blue Monday for small business owners, and it comes at a time when confidence is already in the doldrums.
“Given the burden that MTD has placed on small business owners, it’s vital that the Government makes good on its commitment to light-touch enforcement.
“The software required to comply with MTD alone is setting small firms back by hundreds of pounds – and that’s before you get to the time and resource needed to negotiate new software.”
While council tax, prescriptions, utility bills and car tax are all set to rise, thousands of high street shops, pubs and restaurants will be set for a reprieve.
In last year’s Autumn Budget, the Government announced a business rates discount scheme for small-sized high street properties in England which have a rateable value below £51,000.
Under the plan, small firms will receive a one-third discount on their rates bills from April 1 for the next two years, which Chancellor Philip Hammond said will help “up to 90 per cent of all independent shops, pubs, restaurants and cafes”.
Despite this, Mr Cherry called the current business rates regime “unfair” and “regressive”.
He said: “Business rates is an unfair, regressive tax that hits small firms before they’ve made their first pound in turnover, let alone profit.
“The help won from government to support those hurt most by the 2017 revaluation is now falling away, leaving many small businesses with a 20 per cent hike to their bills plus an inflation-linked increase.
“While we’ve fought hard for discounts this year, a huge amount of further reform is needed.
“For example, a firm with a rateable value below £12,000 qualifies for 100 per cent relief – but a firm working from a premises with a £3,000 rateable value who then expands to another space with the same value?
“They’re hit with a 3,000 per cent increase in their rates bill. It’s obscene.”
Small business owners will be required to put more aside for employees saving into auto-enrolment pension schemes, with the new personal tax year starting on Saturday.
The minimum total contribution to such schemes will rise to 8 per cent of an employee’s qualifying earnings, up from 5 per cent last year. Employers will be required to shoulder 3 per cent of the contribution.
Mr Cherry said: “Though small business owners are absolutely committed to helping employees save, auto-enrolment has already cost them significant amounts of time and money. When the 3 per cent rate hits, the costs will be greater still.
“The Government should rule out any further increases to the minimum auto-enrolment contribution rate for employers. Equally, with the minimum employee contribution rising to 5 per cent, we need to keep an eye on opt-outs.
“The danger is that these increases end up undermining the whole auto-enrolment project.”
Number of businesses in the UK shrinks by 27,000 statistics show
Statistics from the the Department for Business, Energy and Industrial Strategy (BEIS) show there were 27,000 fewer businesses in the UK in 2018 compared to 2017.
Mike Cherry, national chairman of the FSB, said: “For the first time since 2010, we saw a contraction in the size of the UK business community last year. All Ministers and policymakers need to take note, and avoid bringing in new measures that would exacerbate this loss in 2019.”
He added that the package of changes increases the costs of running a small business.
FSB’s most recent Impact of Government Policy Index (IGPI) showed policy interventions have caused costs to increase for small VAT-registered businesses by £60,000 each on average since 2011.