Micro businesses are essential to the UK economy, and those 5 million micro-business owners currently helping to boost the economy within the UK need a voice, and that voice needs to be heard…
Micro businesses make up 96% of all UK businesses – a figure that has contributed to our country’s ranking as the most entrepreneurial country in Europe, and fourth in the world as of 2015.
A micro business, as defined by the government under the EU regulations is a company with 0-9 employees with a turnover of less than 2 million Euros (£1.7 million). They are the smallest businesses in the country, yet are also the most vibrant and big in terms of growth for the economy. There are currently 5 million micro businesses in the UK, with 8.4 million working in the sector, making it the second biggest business division in the country. There were fears, prior to the autumn statement, that the Small Business Rate Relief scheme, helping thousands of small businesses across the country, could be scrapped by Mr Osborne. Instead, and thankfully, the Government has extended the relief for 12 months to April 2017, helping smaller firms to pay less tax on their premises. Although this is a boost in the right direction, there is much more to be done.
To get in insight into the issues currently affecting micro businesses across the country, SBT got in touch with Jason Kitcat. Jason has had years of experience both with successful businesses, small and large, and within the council. He has worked for Netmums, set up his own micro business and is a former leader of the Brighton and Hove city council. He has now joined the team of online accountants for freelancers, contractors and small businesses at Crunch as Micro Business Ambassador, using his experience and knowledge to campaign with and for micro businesses. Jason aims to promote this small, but very large business community, and represent their voices to government.
How does current legislation make it difficult for freelancers and micro enterprises to successfully do business? Why do micro businesses need a voice?
“The rhetoric and implication around some government announcements seems to reinforce a false impression that contractors and freelancers only do what they do to avoid tax – which is absolutely not the case. We need to get across that micro businesses contribute massively to the growth of the economy, and to employment figures which are very positive things! The way the government can help is by getting out of the way of this growth, not perpetuating this stigma with regards to tax avoidance and small companies. We need to change the conversation so that policy-makers accept that not everyone can become the next Google. Collectively small businesses are just as important to the economy as the blockbusters.”
What different problems to larger businesses do micro businesses face?
“The challenges that micro businesses face are mostly to do with resources, and the collective voice, both of which large companies have a huge amount more of. Tax is also a huge challenge for micro businesses’ cashflow, with the ‘little guys’ often paying proportionately far more than the multinationals who can afford to run complex avoidance schemes.
What impact does IR35 have on small businesses and freelance individuals?
“The IR35 rule was introduced by Gordon Brown in order to prevent ‘disguised employment’, which is tax evasion. However, the legislation is very broad and risks catching out people who are not evading tax, but just going about their business. A lot of small businesses work on a short-term contractual basis, going from job to job as this is the most efficient way of them working and using their skills to their advantage. If the government tighten the laws regarding the IR35, there’s huge concern over creating a lot of harm for the whole micro business community.”
How are you planning to help micro businesses?
“Myself, and the team at Crunch plan to build on our body of knowledge about micro businesses, when meeting with MPs and the Lords to spread the word about key issues. Many people, including some MPs don’t realise how large or how important the micro business community is. We will endeavour to make MPs aware of the implications that tax changes will have on small businesses and generally spread the word. It’s an education process to make micro-businesses heard; if they feel they have a strong voice, they’re more likely to use it and succeed.”
I’ve seen reports stating that businesses are far more financially optimistic for 2016 than this time last year, yet others warn that they should still be wary – what are your thoughts?
“Overall, I believe businesses should be confident. The UK is leading the way with the proportion of micro businesses, and it’s easy to see why; it’s incredibly easy to start up your own business now and follow your dreams. Having said that, there is an uncertainty in the air, especially with regards to changes in legislation in April and the EU referendum, so anyone in business should be aware of how those changes might affect them.”
Should micro businesses perhaps be defined differently to help better policy making?
“We’re not ready for legislation change at this point, but what we are in need of is a longer term debate about what it means to be part of our society when so many of us aren’t in straightforward jobs with a monthly salary. The 8.4 million people working for micro-businesses experience current legislation on tax, employment and pensions which either don’t apply or struggle to cope with the fluctuations of small business. What protection do those people have and what does that mean for our society as a whole? No one knows what the correct policy framework is for this new world of work, but it needs to be discussed, and that’s our aim.”
SBT thanks Jason Kitcat for answering our questions on this topic and we wish him the best of luck as Micro Business Ambassador at Crunch Accounting.