Autumn Statement 2014 series: Lower business rates and employment costs
With this Autumn Statement the chancellor has a real opportunity to help lift a major burden on small businesses by lowering business rates.
The prospect of lower business rates was raised in October by business secretary Vince Cable and I sincerely hope the government follows through on this measure.
Business rates are a real constraint for those businesses that are considering a move to larger premises and I’m aware of businesses that have actually downsized to save on business rates.
Of course, business rates are an essential element in funding local government services. However, over recent years I have seen more small businesses put under significant financial pressure from escalating business rates. This must be putting a brake on the economic recovery.
Business rates have become merely a tax collection exercise where it’s hard to see what businesses get back in return. I would like to see an overhaul of the system so each authority is required to devise a system of rating which is mindful of business needs and has the promotion of enterprise as a key component. The system needs to be flexible so it can react to changing fortunes in the local economy.
The other area where I would like to see the chancellor take strong action is on employer National Insurance contributions (NICs). Businesses have already found their employment costs going up substantially with the advent of auto-enrolment pension legislation. While the £2,000 employment allowance has provided some support, for me, the rate of 13.8 per cent on employer NICs is just too high.
I dare say that many businesses would prefer to see a cut in employer NICs than a cut in the rate of corporation tax because with the latter, you’re only really getting taxed if you’re making money, whereas employer NICs remain the same whether you’re struggling or being successful.
Rachel Marsdin is a tax partner at Moore and Smalley.