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Budget: Tax hike for small firms

by The Editor at 15:49 21/03/07 (News)

Small firms faced little joy from Chancellor Gordon Brown's Budget as he increased their corporation tax rate from 20p to 22p while reducing the main rate for big companies from 30p to 28p.

Speaking in the Budget, Mr Brown raised business hopes by announcing: " Because our goal is and will continue to be the most competitive business tax rate of the major economies, I have decided to cut mainstream corporation tax from April 2008 from 30p down to 28p - at 28p a rate lower than America, Germany, France, Japan, and all of our other major competitors - Britain's corporate tax rate, the lowest of all the major economies."

However, those hopes were dashed for small firms when, in the next breath, he said: "To reduce the tax difference between self employment and small To reduce the tax difference between self employment and small company incorporation, I will raise the small companies' rate in three stages from 20p this year to 22p in 2009, recycling all these revenues to legitimate small businesses investing for the future."

Tax hike
The move was criticised by small business groups. Carol Undy, FSB National Chairman, said: “This is the Chancellor’s eleventh Budget and this year’s offering is no different to the others – he gives with one hand and takes with the other.

"However, this year, after some welcome initiatives for our members he throws it all away with a tax hike aimed at small businesses. Corporation tax was cut for large firms but increased for smaller ones. Small businesses employ 58 per cent of the private sector workforce - over twelve million people – and the increase in their tax rate fails to acknowledge their contribution. A cut in income tax is welcome but does not fully offset the dismay felt by small firms despite the other allowances that he has offered."

Chief Executive of the Forum of Private Business Nick Goulding said: "The Chancellor has used smoke and mirrors to disguise the fact that there is nothing in this budget to support small businesses. In fact the resulting confusion created by some of his initiatives will serve only to increase the red tape burden.

"The reduction in the main rate of Corporation Tax will benefit larger firms, not the smaller businesses that make up the majority of the private sector. The changes made for smaller firms will serve only to further burden them."

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Susie Hughes
The Editor © Hardhatter 2007

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