Lee Murphy, founder of cloud book-keeping software provider Pandle, breaks down the Budget and what it means for SMEs and sole traders
It has overall been a good, but perhaps not ground-breaking, Budget for Scotland’s 365,000 small and mid-sized businesses. Those in its vibrant and growing tech sector, as well as its numerous small online retailers, can certainly celebrate modestly the measures and signals… albeit not on strong cider.
The extra encouragement for oil investment through the VAT changes will also be good news for extending the life of this vital part of the Scottish economy. The VAT changes relate to the public services such as the fire force and police.
Regarding the oil industry this was a tax break that involved allowing tax history to be passed on to buyers when they sell their assets. I think this means that they get relief on the costs of decommissioning assets which is significant. This should make it more attractive for new entrants into the sector.
While the self-employed and small business owners won’t be keeping any more of their income as tax allowances have increased in line with inflation, compared to bigger increases in recent years, at least the threatened changes to the VAT and national insurance regimes that would have hit many particularly hard happily did not happen.
This will be a huge relief for Scotland’s microbusinesses and self-employed in particular. The change to businesses rates so they go up in line with inflations using the CPI measure, rather than the usually higher RPI measure, is a sensible and overdue move, but hardly likely to get business owners dancing in the street.
EIS, tech, distance learning and other incentives
I expect that the announcement of doubling the EIS investment limit is good news and will provide a real shot in the arm for Scotland’s tech entrepreneurs. The EIS has sadly been used as a vehicle for tax avoidance by some advisors, but as it has been around for quite some time I hope HMRC will have a good handle on how to craft the rules so they are not onerous for tech companies, while not opening a door for tax avoiders.
This, combined with the new tech start up funding, are again welcome measures that show the government is getting serious about encouraging tech businesses as they are already a huge national economic asset.
The measures to encourage distance learning are good too. I hope they will be hugely beneficial to all areas and will be particularly beneficial to Scotland’s many remote areas where choice can be limited and travel distances are a real barrier to learning, especially for adults with work and family commitments.
Personally, I think distance learning is very effective but really under-utilised. I trained as an accountant through distance learning and never met a tutor, while my staff do a lot of remote learning too. If you consider all the time wasted and cost incurred by people travelling to colleges and business schools for studying, distance learning is the best way to upgrade the digital and business skills across a wide swathe of Scotland.
Reducing unfair tax competition harming UK SMEs
Many small businesses face unfair tax competition from a range of competitors and the Chancellor has made good steps to address this. For instance, large multinationals use exotic structures and tax avoidance measures to avoid paying tax, measures that aren’t open to Scottish businesses meaning they shoulder a big tax cost not borne by larger foreign competitors.
Overall the Government has been good at cracking down on tax avoidance, and the new measure regarding paying income tax for certain types of corporate tax structures is a welcome modest move. I am taking it as a signal that more will follow and the unfair tax playing field faced by SMEs is being steadily levelled.
Scotland has thousands of small home microbusinesses selling on markets like eBay and Amazon. They pay their VAT, but many of the overseas companies on them fail to. The move to make these markets jointly liable is a good move to level the playing field and will be good news for every Scottish business that sells products online.
We can expect these markets to swiftly crack down, in the same way they did with the recent introduction of VAT on digital services, which will be good news for UK e-tailers of all sizes
Should I celebrate or morn the Budget this year?
Scotch has a central place in Scotland’s economy and heart, and it certainly has had a mixed month. While the Scottish whisky industry earlier this month lost its legal challenge to the Scottish Government’s plans to have a minimum cost for each unit of alcohol in a drink, at least in the Budget additional duty was not added to the nation’s favourite tipple… so if not cause for a celebration, maybe a wee dram is in order.