TaxCorporate TaxBUDGET IN DEPTH: Business representatives pan NI hike

BUDGET IN DEPTH: Business representatives pan NI hike

Gordon Brown has been panned by the accountancy and business communities for 'crippling' SMEs after announcing his intention to raise the rate of national insurance contributions by 1% from next April.

CBI director-general Digby Jones said: ‘We are worried that he is now imposing a business tax burden that impacts directly on the cost of employing people at a time when UK competitiveness is being put to the test.

‘An increase in employers’ NIC’s impacts on every business of every size regardless of whether or not they are making profits.’

Meanwhile, PKF warned the increase in NI could prove crippling to SMEs because it directly hits the employer with extra costs.

The firm said a typical business with 100 employees would now have to pay an additional £23,607 each year following the increase.

Sheena Sullivan, tax partner at the firm, said: ‘NIC is a tax on jobs and a disincentive to employ which would hit SMEs – the bread and butter of the UK economy – the hardest.’

Chas Rhoy-Chowdrey, ACCA head of tax, added that the chancellor was running the risk of gaining a reputation as a ‘tax chancellor.’

Ernst & Young tax partner and NIC specialist, Jim Yuill, said: ‘The uncapped 1% charge on employees is a clever wheeze, and of course he can always put it up again if he discovers another pressing need in years to come. Is this the beginning of the end for National Insurance?’

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