Most governments over the last two decades have introduced a multitude of micro changes with good intentions. But these often add complexity to an already complex tax system, which have a disproportionate impact upon SMEs, many of which do not have the in-house resources to deal with added complexity.
Having spoken to our clients in the SME sector, what they are hoping for is fewer micro-changes and more bold measures to stimulate investment, such as boosting capital allowances.
Capital allowances are a very effective way of stimulating activity and growth for businesses. One possible announcement that would be welcomed by SMEs in the UK would be around generous first year allowances to stimulate capital investment. This could be 100% First Year Allowances for a limited period and/or over a maximum amount of spend per business, which would provide a simple way to unlock surplus cash tied up on the balance sheets of medium sized businesses in particular.
Measures to boost the construction sector – for example through government support for large infrastructure projects, would also help to stimulate growth all the way down the supply chain to the SME community. Boosting the house building sector would not only stimulate extra activity from the house builders, but also contribute to the social problem of a decline in housing stock (including social housing). Measures could include a re-introduction of the stamp duty holiday for first time buyers, or on properties up to a cap of £250k. This, alongside the improving lending environment could stimulate demand in the sector and help employees of SME businesses living in high cost cities such as London.
Continuing the cap on the rise on business rates would also be very important to help support the SME sector, in particular any businesses operating in the retail sector.
Finally, we know that the SME sector in the UK falls behind their European counterparts when it comes to levels of export activity so any additional support for businesses looking to expand overseas would be most welcomed. Boosting the support and advice provided by UK Trade & Investment to businesses looking to export (or even invest) into overseas territories, setting up more subsidised trade missions and possibly tax breaks for small businesses looking to export would all be very welcome, and would help to boost growth, particularly by targeting the fast growing economies of the BRICs.
By David Bywater, Tax partner at KPMG