The fact that the government’s most recent budget was conceived in an effort to placate small business has been widely documented and if you managed to catch Channel 4’s ‘Ask the Chancellors’ debate, it was clear that all of the main political parties, had small business firmly high up on their agenda.

In his last budget before the general election, the chancellor not only reduced business rates and put pressure on banks to lend to small businesses and recent company formation owners, he also mad the government’s ‘Time to Pay’ tax initiative a long-term economic policy.

Initially introduced as a short term measure to help struggling companies deal with their tax burdens during the recession, the scheme allows businesses to spread their tax payments throughout the year. However, not all businesses are accepted on to the scheme and in the wake of the chancellor’s budget, many accountants are concerned that small businesses will rely too heavily on it and ignore bigger financial issues.

James Mason, founding partner of accountancy firm ‘Masons’, comments; “ While the government’s ‘Time to Pay’ scheme has been welcomed by the majority of the SME sector, it is extremely important that small businesses and companies that have recently been formed, don’t use it as a way of masking a business’s greater financial problems.”
“Understanding is absolutely crucial; company owners need to be aware of their tax obligations and gain a complete understanding of their cash flow. Otherwise this scheme has the potential to lull companies into a false sense of security and damage as many companies as it will help.”

While the budget has been well received by the majority of the company formation and SME sector. The government’s plan to increase the minimum wage from £5.80 to £5.93 has divided

popular opinion.
While many small business owners feel that the fact that the increase is only marginal reflects the government’s acknowledgment, that most small businesses are still facing daily financial

challenges. However there has been some negative feedback to the changes from some business owners.
Jeff Bridges, spokesperson for the FSB comments; “While our members appreciate the fact that the government has been conservative in the amount by which they have increased

minimum wage. The fact that they have increased it at all has been met with some negativity by certain groups. Small businesses have been on the front line of recession and the have

endeavour to train and keep staff throughout the downturn. The fact the government has increased minimum wage at the same time as deciding not to retract their plans to increase National

Insurance, gives additional weight to the argument that the government don’t listen to what the SME sector wants.” 
Mr Bridges comments lead us on to another grievance the SME sector has articulated against the chancellor’s 2010 budget – namely the fact that the government still plans to go ahead

with their plans to increase national insurance, despite widespread negativity and a petition from the FSB, imploring them not to do so.
Neil Smith, head of a recruitment company, comments; “This year’s budget is definitely an election year budget; it has some short-term voter friendly initiatives, however, it lack significant

detail, and the fact that the government has failed to acknowledge, let alone act on the FSB’s petition to retract plans to increase national insurance, shows how out of touch they are.”

Business groups have welcomed tax relief schemes announced in the Budget to help small firms, saying that the Chancellor has finally recognised the need to put small business at the heart of economic policy. 

However, they expressed continuing concerns about the UK’s Budget deficit and its impact on business activity.

“After two years of economic downturn, the Chancellor has clearly recognised the need to place business at the heart of the Budget,” said British Chambers of Commerce (BCC) director general, David Frost. “Doubling the annual investment allowance, help with business rates, and allowing entrepreneurs to keep more of their gains will prove especially popular.

“However, the Chancellor could have done more to set out a clear plan for the reduction of the budget deficit, which continues to threaten business confidence and investment,” he added.

Alistair Darling’s Budget announcements included a temporary increase in small business rate relief, an agreement with state-funded banks to boost small business lending, the introduction of an adjudicator to deal with small firms’ complaints about bank lending, and increases to investment allowance and capital gains tax relief for entrepreneurs.

The Chancellor’s speech also confirmed an increase in employer’s National Insurance contributions (NICs) in 2011. The Federation of Small Businesses (FSB) said this would obstruct job creation.

“Proposals to increase the rate relief threshold will be welcome news for those small firms whose cashflow in hindered by big tax bills,” said FSB chairman, John Walker. “But continuing plans to increase employee NICs will increase pressure on struggling firms, meaning they will not be able to take on additional staff. It’s a tax on jobs which does nothing to aid economic growth.”

However, the FSB applauded the Government’s commitment to stimulate bank lending. “The Government must now put pressure on the banks to lend affordable finance to small businesses so they can get on with the job in hand,” said Walker. “The role of the new credit adjudicator will be key in this regard.”

Small business owners had mixed views, too. E-commerce software provider Actinic’s director, Chris Barling, said that although the Budget had focused on small businesses, it had neglected to address their most pressing concerns.

“The Government has failed to recognise the day-to-day difficulties of many small firms,” he said. “As an employer of 40 staff, I would much prefer a reduction in NICs in the first place, rather than to have a government agency decide how much of my own money to give back to me in some form of grant through the new UK Finance for Growth Organisation. We employ people overseas because it is too costly to employ them here and we can’t afford the potential payouts.
 
“The Government has put small firms at the centre of the Budget, but often it would be more helpful to small firms if they didn’t intervene and simplified things instead,” added Barling.

Shamin Hoque, managing director of Curries Online said, “Relief on capital gains tax will help us, as will the extension to business rate relief. I think most small firms start up with good ideas but it can be expensive to run a business, so if there is opportunity there to get some tax relief that eases the burden.

“However, the NICs rise outweighs the benefits that he has given entrepreneurs with the tax breaks. When firms grow, they often need to employ people and the Government should be encouraging that.

The Association of Certified Chartered Accountants’ SME policy adviser, Manos Schizas, said that many of the Budget’s promises were made for show, due to its timing in the lead up to the election.

“But there were some good aspects for people wanting to start and grow businesses,” he said. “However, overall this was a Budget for entrepreneurs, not for small firms.” 

Howard Graham, CEO and Founder of Companies Made Simple commented:
“In the circumstances with the general election looming, this was probably as fair a budget as we could have expected.  Small Business owners should be encouraged that much of the focus of the Chancellor’s speech was at least trying to help small businesses.

Politicians from both the Conservative and Labour party have spoken about the small business sector as the backbone of the UK’s economy since the recession began. With the announcement of this year’s budget it seems that the Labour party are putting their money where their mouth is, as it were.

In the new budget, Darling has committed to making more finance available to small business and recent company formation owners. Under the new measures, not only will banks be implored to give new businesses more credit, they will also be obligated to provide the reasons behind rejections and a robust complaints procedure will be made available for companies who have been denied credit and wish to dispute the bank’s decision.  

The chancellor also announced that both Lloyds and RBS will be forced to lend ninety four billion pounds to companies over the next year and of this, over 50% has been allocated to go to small businesses.
Simon Marshall, founder of management consultancy firm Marshall Ltd, comments; “This budget has definitely been conceived with the objective supporting small businesses in mind. Obviously, making more finance available to the SME and company formation sector is definitely a step in the right direction.”

However, the Labour party’s budget has not received unprecedented support from the SME sector. Jack Sanderson, a business owner who signed the Federation of Small Business’s petition to get the government to rethink plans to increase National Insurance feels that the budget could have done more.
He comments: “Ostensibly, the budget does look very positive for the SME sector; the reduction in business rates is definitely a good move. However, I feel that the government could have done more to help small businesses in terms of reducing National Insurance.”