Lords attack Brown’s tax tinkering

Gordon Brown’s tinkering with small business taxation is unhelpful in delivering the consistency that company owners need to make decisions so their ventures can thrive.

The verdict is not from a small business lobbyist but from an influential Lords committee, which has been tasked to discuss the increase in the SCR, which the Chancellor unveiled in March.

According to the measures in the Budget and the Finance Bill 2007, small company owners will see their tax on profits under £300,000 rise 3 per cent by 2009.

The economic affairs committee said the change had undermined Britain’s international competitiveness, echoing industry fears that it will inhibit small companies from growing.

“Too many decisions have been taken with tax in mind and this must be seen as a weakness in the tax system,” the committee said yesterday.

“In this context the frequent changes in the small companies rate of corporation tax have been unhelpful.”

The committee also acknowledged arguments from small business groups, such as the British Chambers of Commerce, that the introduction of a Capital Allowance coupled with the increase in SCR does not represent tax simplification.

They recommended that the government must now review the taxation of small businesses, employees and individuals who operate through companies

“One approach towards reducing complexity and the distortions which tax
considerations may bring to business decisions would be to stand back
and review the issue as a whole in conjunction with the sector,” the Lords said.

Last week, the Conservatives pledged to “look very carefully” at reversing the small companies tax rate, because increasing it would undermine small company growth.

George Osborne, the shadow chancellor, also pledged that a David Cameron-led government would seek to simplify the administration of income tax and national insurance, and reform VAT administration.

The Tory deal for small businesses, proposed to delegates at The British Chambers of Commerce conference, is in return for them offering flexible work and taking greater social responsibility.

The party would ‘set businesses free’ unlike the current one which treats all companies as “bad employers – there to be inspected and meddled with,” Mr Osborne reportedly said.


21st June 2007

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