TaxCorporate TaxIn the disaster zone

In the disaster zone

Brown's give and take Budget hands SMEs a raw deal

The 2007 Budget speech was, if nothing else, a headline-grabbing one.

But the so-called ‘Budget for business’ wasn’t much fun for small businesses,
who saw an unwelcome and unexpected hike in their tax rate from 19 to 22% to be
phased in over three years. The fact that small businesses employ over 12
million people and generate over half of UK GDP didn’t seem to be uppermost in
Gordon Brown’s mind when he divvied up the spoils for the eleventh and (surely)
last time.

But, in the interests of fairness, let us search for the proverbial silver
lining here. There was some good news in the form of a promise to support small
businesses to train their staff, an expansion and simplification of capital
allowances and efforts to simplify the tax system in general. There is a very
long way to go in this last area, but Brown should at least be commended for
making a start.

The decision to cut business rate relief for empty commercial property is a
good one because it will free up premises to be developed and be put to good
use, a process which, in itself, creates and sustains employment.

There are few small businesses that could afford to have a major property
asset sitting empty, so it will be the big companies (for a change!) that are
hit by the measure. But it’s not about small firms gloating over big firms’
misfortune, but preventing big corporations buying up commercial property and
sitting on it as a way of stifling competition.

Brown giving with one hand and taking away with the other will probably be
how this overly-political Budget will be remembered, certainly if the newspapers
are anything to go by.

But for small incorporated businesses, there wasn’t much giving and there was
a lot of taking away. Plus, the giving side of the equation appears to involve
the hard-pressed business owner finding the time to fill out all the benefit
forms. For small businesses, all of the welcome measures described above were pr
etty much cancelled out or even outweighed by the tax increase.

The cut in corporation tax for large companies seems calculated to allow
Brown to claim that business did well in the 2007 Budget. As a result, the
corresponding increase in small business taxation is in danger of being ignored.
It shouldn’t be. The 2007 Budget failed to acknowledge the massive contribution
SMEs make to the economy.

Stephen Alambritis is head of parliamentary affairs at
the Federation of Small Businesses

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