In his final budget before the UK general election in May, British chancellor George Osborne made a strong pitch to small business with a package of measures aimed at cutting compliance costs and overheads. These included a promise to scrap annual tax returns and replace them with real-time digital accounts, and to review the country’s antiquated system under which spiralling property prices have sent business rates soaring, hitting high street retailers particularly hard.
Just as significant, accounting standards for the UK’s three million small and ‘micro’ businesses – those with fewer than 50 employees and a turnover of less than £10.2 million (approximately AU$20 million) – have been substantially simplifi ed following the UK government’s decision to implement the EU’s Accounting Directive. The Cameron government argues the change will relieve small business owners and managers, including hundreds of thousands of sole operators, from onerous reporting requirements often out of all proportion to the scale of their commercial activity.
But experience elsewhere suggests the effect of such a reform may be modest. In New Zealand, the government has claimed that changes to the Financial Reporting Act – greatly reducing the detail that small and medium businesses have to include in their fi nancial statements – will save $90 million a year in compliance costs. But accountants are not so sure.
PricewaterhouseCoopers New Zealand partner Scott Kerse told Wellington’s The Dominion Post that many business owners planned to continue to provide the same level of detail as they always had, not least because of the fi nancial information potential purchasers would require.
Local incentives
In Australia, the $5.5 billion Growing Jobs and Small Business package announced in the May Budget was good news for those seeking a reduction in overheads and compliance burden. Among the measures in the package was a 1.5 per cent company tax break for small incorporated enterprises (and a tax discount of 5 per cent for non-incorporated entities, up to the cap of $1,000) from 1 July 2015.
The federal government has also revamped employee share scheme arrangements, at a cost to the Budget of $200 million, to ensure options are taxed – at a 15 per cent discount – only when they are converted to shares (not when they were received, as under the previous rules).
In addition, small businesses are to be conferred the same legal protections against unfair contracts as consumers. Plus, overly harsh penalties for superannuation breaches will be curbed and Board of Taxation recommendations for tax system changes intended to streamline processes and cut red tape have been heeded.
For firms under significant pressure from lacklustre economic activity and subdued consumer spending, these changes cannot come too soon.
