Darling could have done more for SMEs, say advisers

A postponed crackdown on family business taxation and a deferred hike in small business taxes were condemned by advisers and business representatives for being delayed instead of canned.

According to Treasury figures, the deferrals give more than £1bn back to business over the next three years, but advisers claim the chancellor should have done more than just leave the current tax position as it is.

‘The government has seen sense by deferring an increase in the small companies tax rate, but it is a pity it did not go further by introducing a cut, returning the rate back to 19%. This would deliver real results,’ said John Walker, Federation of Small Businesses national policy chairman.

On the deferral of a crackdown on ‘income shifting’ between a husband and a wife to minimise bills, he said: ‘The government would have sent a much stronger message of support for family businesses by scrapping it completely.’

Anne Redston, visiting professor at Kings College London, said introducing income shifting rules would have ‘jarred’ against government plans to help small businesses. ‘It would have struck the wrong note,’ said Redston. ‘It would be nice to think they’ve come round to our way of thinking, but it’s not abandoned ­ it’s just in the wings.’

‘I still believe the long term aim is to bring small business corporation tax up, large business tax down and align them,’ said Smith & Williamson national tax director Richard Mannion. ‘Hopefully income shifting rules have been kicked into the long grass, but the threat is it’s still just a deferral.’

The cost to the exchequer of deferring income shifting plans is estimated at £485m over the next three years, while the corporation tax deferral will cost £610m.