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Brown receives small business 'wishlist'

The Federation of Small Businesses has called on Gordon Brown to lighten the regulatory load on small business owners when he delivers his Budget on March 22.

Representing around 195,000 small companies, the Federation has delivered a ‘wishlist’ to the Chancellor of enterprise aspects they want urgently reviewed.

Central to the appeal, is the call for a clearer and simpler tax system that should consolidate the streamlining measures of the regime introduced in the Pre-Budget Report.

Further and much-needed modernisation of the current tax system should include making it easier for small firms to administer, while it should also abolish IR35 – which has become known as the ‘freelancer’s tax.’

The Federation pointed out that such an ambiguous tax law not only raises minimal revenue for the Treasury, but crucially, it prohibits many people from making the jump from employment to entrepreneurship.

IR35 has become a “bureaucratic burden” to both the professional worker (the taxpayer) and the government, therefore it should be scrapped for the good of limited company owners and contract professionals, the FSB said.

To help early-stage companies and to ensure small firms choose their status for reasons other than tax incentives, the state should consider re-introducing a “£10,000 tax free Enterprise Allowance.”

According to the Federation, “this would re-affirm the view that decisions about business status should not be made based on tax incentives. It would also be easier for both the government and employers to administer, and would make a significant difference particularly for newly started businesses.”

Elsewhere, the paper calls for the government to review the inspection regime for small firms, as small business owners have suffered both the financial and psychological effects of tax inspections.

Such probes by HMRC are invasive and are “disproportionately heavy when considering the amount of revenue raised for the government,” the FSB said, before suggesting £500 payouts to owner-managers if the Revenue fails to explain why inspections are due.

A more joined-up approach should replace the current regime, “so that a business that has had an inspection without any problems, is given at least five years without another inspection.”

Neil Hamper, the Federation’s national chairman, said the best way for the Chancellor to achieve his policy objectives is to work with small firms, as he has done with their mid-sized counterparts, to create ‘a beneficial business climate that encourages growth and entrepreneurship.’

The Federation’s wishlist also includes:
• A demand that National Insurance should not be used as a method of general taxation. The FSB also firmly believes that employer payroll administration should not be used to deliver the Government’s social policies. This places significant burdens on small employers.

• A suggestion for a zero rate VAT trading scheme, where VAT is only charged at the final stage of consumption where previous traders in the supply chain are all VAT registered. This would eliminate time-consuming administrative work for firms and HMRC.

• A request for a moratorium on the annual increases in the business rates multipliers to bring the tax more closely in line with lower levels elsewhere in Europe. As this tax is not profit related it can have a disproportionate effect on small firms that large companies do not experience.

• A call for increased long-term investment in the road network, just 14p of every pound raised in road taxes is spent on the roads currently.

• A plea to keep rises to the National Minimum Wage to the rate of inflation in future. Initially it was set at a sensible level but a series of above-inflation rises mean it is now causing pressure on firms, especially outside London and the South East.

Mar 8, 2006
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