Call for chancellor to think about effect of budget on small business.

The Federation of Small Businesses has written to the chancellor George Osborne ahead of the Emergency Budget on June 22, urging the coalition government to ‘think small first’.

The letter requested Osborne temper the expected cuts with measures which will inspire confidence and allow businesses to innovate, grow and employ more people.


The FSB also asked the chancellor to recognise that a decision on timing for the expected VAT increase is vital for small firms’ cash flow, as they do not have the financial buffers available to be able to absorb an increase in VAT that big businesses have. The letter urged the government to include a "sunset clause", which would allow small firms to plan for the eventual reduction.

The organisation made it clear it opposed any major increase in Capital Gains Tax for businesses and entrepreneurs, saying it would stifle long-term investment in small firms, and argued that, while cutting the deficit is important, it must not be at the expense of the recovery or mean a hike in taxes for small businesses.

Finally, to encourage small firms to employ staff and grow, the FSB urged the government to go beyond the Conservative manifesto proposal to cut employer NICs for new companies only. The need to pay NICs should be negated for existing firms in addition to start-ups, it said.

FSB national chairman John Walker said: "It is imperative that any changes to Capital Gains Tax or VAT go hand in hand with an ambitious plan for helping economic growth through allowing small firms to employ, grow, invest and innovate. Proposals to give new firms a National Insurance holiday do not go far enough and will not help those businesses who have been running for a couple of years and want to expand by taking on staff.

“By cutting employers NIC payments for established companies that want to take on staff, the government would benefit from the creation of new jobs and the additional revenue from income tax and employees NIC contributions that would be paid, while freeing up business cash flow enabling it to grow."