SMEs in 2020Statistics show that 600,000 smaller businesses could be at risk of collapse this year, the most since the Global Financial Crisis over a decade ago. As a result, SMEs owners will want the Government to support better funding options that will help startups and smaller businesses grow, as well as more beneficial tax relief policies to facilitate their survival.
The state of funding (and the economy)2019 saw banks less willing to lend to smaller businesses due to wider economic issues such as uncertainty around Brexit. With trade agreements yet to be finalised as well as the rising economic impact of coronavirus, it is likely that banks will not be any more willing to take risks funding smaller businesses this year. Furthermore, challenger banks, that were once tipped as the alternative for SMEs seeking finance, have also become more cautious about lending to smaller enterprises.
The six-point Budget wishlist for SMEsHere are what SME owners are likely to want to see in tomorrow’s Budget: 1. The protection of Entrepreneurs’ Relief SMEs will want to see the continuance and promotion of government tax relief programmes for businesses. A key concern for businesses this year is whether the Budget will announce the reduction or abolition of Entrepreneurs’ Relief. Many are worried that scrapping this policy altogether could kill entrepreneurialism in the UK. 2. The extension of R&D Businesses will want to see continued support for UK businesses engaging in R&D (research and development). SMEs, as well as larger companies, benefit from this scheme and it is likely that SMEs already involved in R&D will want it extended in order to innovate and contend with the wider economic drain brought about from Brexit. 3. Increased Capital Expenditure and Revenue Relief SMEs are also calling for an enhanced level of Capital Expenditure Relief, as some are saying the level currently available through Annual Investment Allowance is not enough. There are also calls for enhanced revenue reliefs for SME exporters, which could help them grow despite the climate of Brexit related uncertainty in the sector. 4. Increased Annual Investment Allowance There are also calls for Annual Investment Allowance to be maintained and even increased. Currently set at 1m, it is expected to be reduced to 200,000 by next year. There are concerns that if reduced, SMEs involved in the innovation economy, including in the tech and AI sectors will not be able to invest in the equipment they need to drive their businesses forward. 5. No Digital Services Tax SMEs want the proposed Digital Services Tax to be scrapped. As the tax will not be EU wide, it means UK businesses, including SMEs, could find themselves “at odds with trading partners should other countries not choose to introduce a similar tax,” according to Richard Godmon, Tax Partner at accountancy firm Menzies LLP. The imposition of this tax could also result in a decline of international orders among UK businesses, he adds. 6. The maintenance of Business Property Relief and Small Business Rates Relief SMEs are concerned about a potential review of Business Property Relief. If removed, it will mean that family-run businesses will have to pay a tax penalty when they transfer ownership to the next generation. Considering the ongoing problems plaguing UK retail, SMEs with a high street presence will also look for the continuation of business rates relief in tomorrow’s Budget.
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