Thank you to everyone for contributing, and I hope that Prelude and Growth Britain will continue to inspire business owners and start ups across the country to drive innovation and growth. Keep up the good work.

Lord Young, Enterprise Adviser to the
Prime Minister

Join the debate! Tell us what you would do to make Great Britain, Growth Britain and let us know which ideas you agree or disagree with.

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VAT free Shopping Days

Specify certain dates for VAT free shopping/dining/services. Throughout the year the govt can specify days on which items can be purchased VAT free.

For example if you make it shoes, you will get all the women/mothers out there, who will shop for other items upon which VAT would be charged. This also gives shops opportunities to move product that they might not be able to shift as easily via sales. It also brings more people into shopping areas/high streets, which means more money spent on transportation/petrol and food&drink. This can be done around multiple verticals and industries. This puts people in the frame of mind to purchase more because they see themselves saving what they would have spent on VAT. These days can be staggered throughout the year and be applied to industries who are especially feeling the pinch of the recession.

Bottom line is you get people out and about and puts money in circulation. There are a lot of High Streets around which would benefit from having consumers gently prodded in the right direction.

And yes while it does mean an up front hit to the government on VAT being collected, it does give the opportunity to shops to generate revenue and perhaps not have to lay off an employee or worse, go out of business.

This could be applied to Petrol where the Govt on certain weekends reduces the amount of tax on petrol, so petrol stations around the country roll back the cost per litre by whatever the decrease in the tax. In the States it was found that when petrol is less expensive, families go out in the cars and will go shopping, dining, etc … Bottom line: more money is spent.

These are fundamental growth opportunities which can be managed by the Government. It is like turning levers to “fine tune” the economy.

Why don’t you add these to the pot.
Now that I understand the short term/immediacy of it all, these suggestions better fit the bill.

David Blumenstein, TEWKWORKS | Sun 12th Jan 2014 at 18:12

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Scrap Corporation Tax, its a tax on small business, not large corporations

Corporation Tax may have been fit for purpose when it was introduced in 1965 but the world has changed since then. Large businesses are online, off shore and global and Corporation Tax hasn't evolved fast enough to keep up with this change. So large business don't pay the tax but UK based SME's still get caught by it, so not only does it fail to generate revenue from large corporations for the Government but also gives them an unfair advantage against their smaller competition. This tax is also bad for UK Plc as it drives companies off shore, taking tax and employee consumption revenue with them and of course drives good brains from our shore in the process.
There is a tax already in place which would remove this advantage for large businesses and that's VAT, which captures all transactions in the UK. So instead of rebating VAT, an equivalent amount could be retained by the Government. This system would encourage companies to come back on shore as the benefits would be removed and will also allow SME's the same even hand as large companies, which is the surely a more democratic approach for any taxation system.

Dominic List, Gandys | Tue 17th Dec 2013 at 17:58

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Alternatively tighten and apply tax law fairly with punishment including use of custodial sentences for CEO of tax avoiding companies- this is social unacceptable behaviour for those on benefits- and should be so for the wealthy- there again I forgot- in whose interests do the wealthy govern?
Phil Tucker, Local authority | Mon 23rd Dec 2013 at 09:35

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Getting on the property ladder if you are self-employed

If you are self-employed, one of the key benefits is being able to discount relevant business costs against income (that's expenses against income). This benefit, as I see it, justifies the inherent riskiness and lack of other perks that employment offers. The aim, if you like, is to make as LITTLE 'taxable' profit as possible by keeping receipts and noting down proper business costs. However, in doing this, all banks and institutions offering mortgages look only at the figure AFTER expenses have been taken off (i.e. NET). This means that if you earn a relatively healthy £30k-£40k and put off a realistic £15k-£20k expenses, this would show up in the accounts as only £10k for the year end. Compare and contrast where figures for employed are taken as they are. So, for example: somebody employed on £25k is likely to be accepted for a mortgage, whereas somebody self-employed on, say, £40k isn't (if they've put down expenses as any accountant or HMRC official will support).
I'd like to propose that we make it easier on the self-employed to get onto the 'property ladder' by looking at the gross income/turnover AS WELL (not necessarily instead) as net. Otherwise we aren't encouraging business owners and risk-takers (at least those who aren't generating much higher profits...yet).

Jack Symons, Treetops BD | Tue 17th Dec 2013 at 15:42

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Incentivise those selling businesses to start new businesses quickly

Currently there are some fabulous tax incentives to invest in start-ups as an angel / minority investor such as SEIS & EIS. There is however no tax breaks to encourage you to start a new business quickly once you have exited.

If you could effectively reduce your tax bill on an exit - either at the Entrepreneurs Relief Rate of 10% or at 28% above the £10m lifetime allowance if you say started a new business in a certain timeframe. This could be set-up in a similar way to SEIS/EIS but with different parameters to encourage large investment from entrepreneurs with a successful track record.

Rules could be set around the timing (e.g. within 2 years of exit) or even based on the number of people the new entity employs.


Rob Hamilton, Instant | Tue 10th Dec 2013 at 18:58

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Would this not only allow people to buy and sell companies and avoid or have a huge saving on tax?
Terence Barnett, FestiveFridays | Wed 11th Dec 2013 at 13:38

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Tax scheme

The SEIS Tax scheme is a blatant scheme to help people who pay a lot of tax avoid some of it in return for investing in a startup. (cheaply) Picking up a taxpayer funded bargain.

How about raising the tax threshold for a startup so that the saving would service a small loan that way the entrepreneur gets to keep all of his company.

Ownership is everything, and £250/mth or £3k/yr would service a £10/k loan over 5 years.

Investors and angels aren't always great for a startup for many reasons.

If the startup does sell his company for a small fortune, or makes a good living from it later on he is more likely to spend the money he makes which is good for the economy, while a wealthy investor is more likely to stick it offshore.

The startup may then feel able to start a larger project making more money, but if he has to give a large portion of his companies proceeds or earnings to an investor he may never escape his poverty trap and is stifled.

The gvt will benefit more from people if they stop clipping their wings.

I am of course talking about raising the threshold by around £15k or even more, but startups would be encouraged to 'think lean' to avoid the SEIS scheme and taking on an investor.

Startups live hand to mouth and as we all know cash flow is an issue, so that big £3-5K tax bill once a year really hurts them, so take it away and take away the demanding investor too.

The chancellor and the bankers will like this too as it's another way to land the little people with more debt. And business loans carry a higher rate of interest than mortgages.



Mark Sadler, YourCareHome.co.uk | Mon 9th Dec 2013 at 21:18

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Give SMEs an advantage for public sector contracts

Most public sector bodies are obliged to put any contracts out to tender in order to provide a level playing field for potential suppliers. In reality what happens is that these contracts are predominately reserved for larger businesses with unnecessary stipulations placed on them. For example often there are requests that a company has been operating for a certain number of years, has a strong financial position, large team and experience with other public sector contracts. This presents an enormous barrier to SMEs who are often equipped with small, agile teams and strong industry knowledge yet are out-muscled by larger institutions with established reputations. In fact if the public sector worked with more SMEs they will find that they are far more cost-effective and offer more personalised levels of service. Furthermore they are open to experimentation, have an innovative approach and much faster decision making. These are particularly important for technology contracts where operators have to move fast to keep pace with the rapid rate of innovation.

Therefore what George Osborne needs to address in his next budget is how to incentive the public sector to work with SMEs. Since SMEs are viewed by the government as the future for economic recovery, any barriers they faced need to be addressed. Why not look at tax incentives for public sector tenders which are taken on by SMEs. These would help the SMEs applying and overall they should provide a better level of service than much larger companies.

Sam Parton, Openplay Ltd | Fri 29th Nov 2013 at 10:19

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There is a commitment of Government to award 25% of contracts to SMEs but little evidence yet. The main obstacle is demonstrating the tenderer is big enough both to survive the length of the guarantee period and to perform the onerous conditions that are often in place. To combat this there could be a performance bond created, backed by Government capital. Maybe successful tenderers would pay a premium to this fund (which would be ignored in tender prices0. Not completely fair but a way through? We pay premiums to export and building contractors and tour operators both use bonding schemes.
Malcolm Durham, Flexible Directors Ltd | Thu 5th Dec 2013 at 12:01

Agreed, make this work available to all, not just the large corporates.
In addition, the tax payer is sometimes paying too much.
We have worked for the public sector many times in the past 2 years. However, most of the time we are acting as subcontractors for a significantly larger companies who has won the work, but has no ability to deliver it.
There have been occasions when there are 3 or 4 companies between us and the public sector body requiring and paying for the work. That is 3 or 4 companies that need to make a profit on the work. How much extra are the public sector paying that they need to.
Make this work available to all, not just the large corporates.

Stephen Davis, StarBase | Mon 9th Dec 2013 at 12:40

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Uncompetitive

It is impossible for the Pub and Club industry to compete when the Government take 45p in every Pound in Tax. This is an industry that employs mostly youngsters and gives many a start in employment. However as things stand at the moment its impossible to make a profit let alone expand or refurbish. My three outlets pay almost 10% of turnover in business rates, 20% VAT, Paye, Beer duty and if you are lucky Corporation Tax,now that is the only tax we have not paid for 8 years !! Give us a break and we will employ many more youngsters and give them a chance in life.
gary benjamin, Rosewish Ltd | Fri 29th Nov 2013 at 08:59

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Two of my local pubs closed recently due to being told what/how much to buy and sell it for when they could have got it cheaper at the Cash & Carry.
David Beacham, Cyclewirks | Thu 5th Dec 2013 at 11:45

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Expand R&D Tax credits

My suggestion is that the R&D tax credit allowance is broadened to include virtually all design and development projects not just those that meet the current high threshold of recognition. It should also be expanded to include all foreign exploration/ marketing and selling costs.
This would massively derisk growth opportunities for smaller ventures where the opportunity cost of the owner travelling is lost management resource back at the fort.

stephen sacks, muubaa | Wed 27th Nov 2013 at 09:57

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I suggested an export tax credit along the lines you suggest, restricted to £1m of spend over three years. I was told it amounts to state aid under EU rules. But so does the R&D tax credit. So shouldn't the Treasury be able to get over this hurdle? Exporting is fundamental to improving our prosperity and the UK is way down the scale.
Malcolm Durham, Flexible Directors Ltd | Thu 5th Dec 2013 at 12:14

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Let entrepreneurs use Corporation tax to generate jobs

Companies should pay corporation tax. But what if they committed to pay it as a delta in employment taxes? Corporation tax is a big drain on cash-flow. If that cash could be put into recruiting more people instead, the tax take is increased and more jobs are created (and no bankers required).

If Tax take = New Jobs x (Employer employee taxes) - Corp Tax.
But if new jobs = 0 then tax take = Corp tax

Example: £14k of corp tax to be paid in Jan. Employ 2 more graduates at £30k pa. I can use the £14k to fund the first quarter, offsetting the riskiest period. Over the tax year they pay £7k each in taxes, company pays c £3k. Company then pays £14-10k in corp tax delayed to end of year, but 2 jobs are created. In turn more profitable business created through employing more people - so more corp tax due in following year

Alchemy! There must be a catch......?

Peter Massey, Budd UK Ltd | Tue 26th Nov 2013 at 23:29

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I think that this is unworkable in UK law as
1 The Company is a separate entity that pays tax on its profits.
2. The employees are rewarded by the company but responsible for their own tax. That tax is based on their earnings from the company which reduce the company's taxable profit.They are responsible for the vcompany's profits or tax liabilities.
3.How would you reward them for the company deducting tax from their salaries and using that to reduce profits- then afterwards having a second bite by setting off the employees tax paid against the company's own tax bill.
4 More like create a tax relief for small employers when they committ to employ extra staff whioch elimiates a certain amount of CT each year for say 3 tax yearsso long as employees retained
Ewan hayes, hayestax limited | Sun 8th Dec 2013 at 20:54

Tricky to implement but a grand idea. Govt spend taxes badly. If the money is instead forced into investment, and in a scenario where the business manager is in a good position to judge whether that investment is likely to yield good returns, the net result should be growth. Simples!
David Whitehouse, Aldersgate Global Trading Ltd | Sun 19th Jan 2014 at 17:21

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Write off Business Losses Against Other Income

There may be something else around "writing off loses against other taxes" - not being a tax man I believe that if you own land you can offset losses made on a farm against tax on other income - but i am not too sure you can do this with "businesses" - all you can do is accumulate looses in the hope that one day the business becomes profitable
Philip Witheridge, Grove Information Systems Ltd | Wed 20th Nov 2013 at 18:24

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Carry Forward Unused Tax allowances

How about being able to Carry Forward "Unused Tax allowances" - like income tax of CGT.

Let me explain - when I first started I could fund what I did 'cos i had saved up but for first 3 years I earnt practically zero - which meant I could not "use" my tax free allowance or the different income tax brackets rising to 40%.

If entrepreneurs could carry those forward when we do have income we can pay less tax.

Philip Witheridge, Grove Information Systems Ltd | Wed 20th Nov 2013 at 18:22

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2 Years Tax Free for Start Up Businesses

Do not tax profits of start up business in the first 2 years of business , this the time when they need to reinvest a maximum into growth and it's in the first 3 years that most new business fail, giving them that little extra help would be very benDo not tax profits of start up business in the first 2 years of business , this the time when they need to reinvest a maximum into growth and it's in the first 3 years that most new business fail, giving them that little extra help would be very beneficial
Cecile Reinaud, Seraphine | Wed 20th Nov 2013 at 17:49

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Or offset any increase in the employment taxes paid by employer and employee against Corporation Tax so that the cash-flow is strengthened
Peter Massey, Budd UK Ltd | Tue 26th Nov 2013 at 22:56

It sounds good but what will happen is you "WILL" have people starting up and closing down businesses every 2 years. This will be done deliberately to avoid tax and actually having a detrimental effect on growth.
Terence Barnett, FestiveFridays | Wed 4th Dec 2013 at 16:14

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Business Rates impact on the low paid

There is a problem with business rates because

1. they depress start-up activity and,
2. they act as a fixed cost overhead based on workspace occupied, making them particularly punitive to businesses which employ lower paid workers.

In the USA there are no property taxes suppressing start-ups
------------------

On a trip to the US recently I sat eating an inexpensive pizza in a large restaurant in a run-down mall. There were two other customers there. Beside an enormous stack of pizza boxes were two young men, one wearing an apron and the other with a helmet on his lap. They were sitting on the counter chatting with not much to do because business was slack. They were talking about the profit margin on their anchovy pizza!

I have never in Britain seen so many square feet of commercial premises being put to such low return use, or two such young men concerned with profit margins. Why? Because in Britain it is impossible to recognise that an existing commercial property's only viable business use offers a low return; one that is insufficient to pay the large fixed overhead of business rates.

Those two apprentice entrepreneurs could not exist in Britain. In Britain this property would be empty and falling derelict, and those two young men would be unemployed, rather than learning how you can make ends meet through low-skill, yet profitable work.

Business rates are disproportionately punitive to the lower paid
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Business rates are the biggest lower-paid job-killer in Britain today. Almost all employing businesses need commercial premises of some description. But when they first open for business, or often during quiet periods of off-season demand, young businesses lose money fast because they have a HIGH fixed overhead in business rates.

Running young businesses requires LOW fixed overheads. Where costs are variable, not fixed, they can be brought down to match the level of revenue and minimise early or seasonal losses which in young businesses are almost inevitable, and often fatal.

But business rates are a high fixed overhead. They have nothing to do with sales revenue, or employment, or profits. Business Rates are a tax on business existence. Government is waiting in the delivery room to tax any infant business, and what is worse, because the tax relates to workspace, it applies at a far higher marginal rate on lower paid workers than it does on higher paid ones.

Everyone who thinks about it realises this is dumb. But because a business has no vote it is convenient for government to dump higher taxes on business rates. Consequently - on a per-square-foot basis - business rates in my experience have been six times as much as the residential council tax (the equivalent private residence tax) in the same area. A similarly inexcusable multiple applies between a residential parking permit and a business one. This anti-business policy kills young businesses stone dead.

Can this problem be fixed? Yes it can.

A solution in "Low Paid Worker Relief from Business Rates"
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Businesses collect and pay employees' taxes through the PAYE scheme. Young businesses should be able to reclaim their business rates with a PAYE tax receipt for a low wage worker.

The policy statement (below) denies relief to property asset holding businesses, and to established businesses, and to businesses which employ only high wage earners. It targets relief at young organisations which have created new jobs on lower wages. This is the sector of the economy which currently shoulders a disproportionate and punitive share of business rates.

Just as importantly its implementation is very easy. Business rates are collected and paid in the normal way, and later redeemed by submitting a simple claim composed of the employer's NI account number and the relevant employee's NI number. The place and period of employment, the rate of pay, and the amount of tax already paid via PAYE, are all already on the employee's NI record held by HMRC.

Like any good relief this should reduce on a sliding scale, so that a mature business pays its taxes on the same scale as other mature businesses and so that there is no sudden cliff, but a gradual stepping-up over time to the normal tax rate.

"Young Businesses" are defined as those which have not yet made taxable profits in five tax years.

"Qualifying Lower Paid Workers" are defined as workers whose PAYE income tax records show that their income is below 80% of the national average wage.

Policy : Where a Young Business employs Qualifying Lower Paid Workers they may claim, and HMRC will redeem to the business, paid PAYE contributions as follows, up to but not exceeding the net total of business rates paid on the building:-

Age of Young Business not exceeding
1 year 2 years 3 years 4 years 5 years
Time
served
1 year -100% -100% -100% -100% -100%
2 years n/a -80% -75% -50% -50%
3 years n/a n/a -50% -45% -25%
4 years n/a n/a n/a -30% -20%
5 years n/a n/a n/a n/a -10%

NB. Currently there are several forms of business rate relief, but they offer lower tax bills to a mixture of charity, religious, and amateur sports premises, and one to very small businesses which serves primarily to dis-incentivise growth. These existing reliefs incentivise property speculators to house charity shops (which is perhaps why there are so many of them doing so little business) and - in one case I have heard of - to found a religion!


Paul Tustain, Bullion Vault | Tue 19th Nov 2013 at 10:09

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I can see this might help and have ticked in support. However this solution still requires SME managers to fork out their money first and submit claims later. Many will be financing their businesses partly with credit cards so it hurts. Also, many will dread filling in the claims and may not get around to doing so as they struggle with the many other aspects of keeping their businesses running. The government officials and 'their' civil service have no clue how small business manages its workload, which is why even their best intentioned initiatives often make things worse. To encourage that sector the initial tax spend must be reduced and, importantly, the taxes should be taken from profits earned in preference to committed spending as is the case with the counter anti-enterprise business rates.
David Whitehouse, Aldersgate Global Trading Ltd | Sun 19th Jan 2014 at 17:10

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