Government to snub small businesses

Link: Small companies tricked into tax trap.

Tax experts have reacted with outrage to the news, claiming the government pulled a similar trick in last year’s pre-Budget report, when the infamous paragraph 5.91 resulted in a 19% tax on small company dividends.

Anne Redston, tax partner at Ernst & Young, said that the government’s record in small company tax matters had been an ‘unmitigated disaster’ with hugely unpopular legislation such as IR35, Section 660A and the withdrawal of the 0% rate of tax on company profits.

‘It is deeply worrying that the same policymakers believe they can produce a reform of this area by talking only among themselves,’ she said.

Redston claimed that the Revenue had assured the profession there would be ‘informal discussions’ before the government produced its draft discussion paper in time for the pre-Budget report, but that the Treasury has now reneged on that stance.

Neil Hamper, head of the taxation and financial affairs committee at the Federation of Small Businesses, agreed with Redston. ‘It always seems to be scotched by the Treasury. Whether this is all about ministers knee-jerking, I don’t know,’ said Hamper. ‘There is complete disillusionment.’

A spokesman for the Revenue said the discussion paper to be released at the PBR would offer stakeholders a chance to liase with the government, but that the ‘Treasury is in the lead on this’. No one from the Treasury was available for comment as Accountancy Age went to press.

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