smallbusiness.co.uk: Helping your business think big

The Treasury has announced the 2006 Pre-Budget Report (PBR) will be on 6th December. It is likely to grab the following day’s newspaper headlines, but closer analysis will reveal few new initiatives or major changes. So why should owners and managers of small- and medium-sized businesses (SMEs) take any notice?

The first point of interest is that the Chancellor will almost certainly announce progress on two key initiatives affecting SMEs. Firstly, he will update us on the government’s plans to reduce the ‘administrative burdens’ on business.

Previously the Chancellor set government departments the task of measuring the administrative burden they imposed on business. Examples include form filling and the need to raise VAT invoices. He will review progress towards the target by which each department’s total burden must be cut. So, SMEs should start to notice some reduction in the government’s form filling requirements in the next year.

The second major initiative of interest to SMEs is the proposed reduction in business support schemes. The Chancellor is due to give a progress update on the target of reducing 3,000 schemes down to a core 100. This is important for start-up and early stage businesses, many of whom receive help which soon may no longer be available or is offered in a different form.

Perhaps the greatest interest for smaller businesses will be in possible changes to the taxes they pay. Pressure to reduce the public sector deficit probably means that there will be no great tax giveaways. Most likely is some raising of the tax burden for environmental considerations, following the Stern Review. So those small business owners with not very fuel-efficient vehicles, plant or premises might find they are more heavily taxed following the PBR.

But even if the PBR proves to be a damp squib, there will be plenty going on that smaller business should be aware of, including implementation of the 2006 Companies Act, which for the first time lays down the duties of directors. This includes a duty to promote the success of the company, whilst taking into account the interests of other stakeholders such as employees, customers and suppliers. Directors who fail in their duties can then be sued by shareholders.

There are other changes affecting the way small companies are run. The timetable for introduction of the rules may be announced in the PBR.

Also coming up soon and potentially of great interest to SMEs is the final report of the Lyons inquiry into the funding of local government in England, due to report to Ministers in December 2006. It is likely that the inquiry will suggest that the current system of national business rates will be transferred back to local government. Some small business organisations fear this will result in greater disparity in business rates across the country with some businesses facing much bigger bills. With all this in mind, smaller businesses cannot afford to ignore events such as the Pre-Budget Report.

Clive Lewis,
Head of SME Issues,
Institute of Chartered Accountants in England and Wales

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