As expected, Chancellor Phillip Hammond’s Autumn Statement was a cautious one, offering perhaps a small dip in temperature, but no impending storms for the coming months.
However, he did raise some points which small business owners should take note of:
From April 2017 businesses which use the flat rate scheme to account for VAT, and firms who supply services rather than goods, will need to check the level of costs they incur to make sure they are using the correct flat rate.
If purchases of goods are below certain limits they may need to use an increased flat rate of 16.5 percent, which may mean the flat rate scheme is no longer beneficial to them.
This rate will apply if a business’s purchases of goods are less than 2 percent of their VAT inclusive turnover, or if they are more than 2 percent, they should be less than £1000 per annum.
The definition of goods excludes capital expenditure, food and drink for consumption or vehicles, vehicles parts or fuel, except in the case of businesses that are supplying transport services.
Draft legislation in this point is expected to be published on 5 December giving further detail.
National Insurance and the Living Wage
Another point that will interest small business concerns National Insurance (NICs) thresholds and the Living Wage.
From April 2017 the threshold above which employer and employee NICs will become payable will be aligned at £157 per week, as recommended by the Office of Tax Simplification (OTS).
This should simplify the payment of NICs for employers.
After recommendations from the independent Low Pay Commission, the government will increase the National Living Wage from £7.20 to £7.50 from April 2017. The government has also accepted recommendations to increase the National Minimum Wage rates from April 2017 for:
- 21 to 24 year olds from £6.95 to £7.05 per hour
- 18 to 20 year olds from £5.55 to £5.60 per hour
- 16 to 17 year olds from £4 to £4.05 per hour
- apprentices from £3.40 to £3.50 per hour.
This new commitment is underlined by the Government’s pledge to invest an extra £4.3 million per year to strengthen National Minimum Wage enforcement.
So, a National Minimum Wage campaign will be rolled out to raise awareness among employees regarding their rights, and to alert employers of their responsibilities.
HMRC will be tasked with reviewing employers considered most at risk of non-compliance with the NMW and there will also be targeted support for small businesses to help them comply.