Use Budget to slash tax, says small business group

Small firms can help the UK recover, says the FPB - with a little help from the taxman.

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Last Updated: 31 Aug 2010

Politicians love to tell us that small businesses are the backbone of the UK economy (and other such hackneyed phrases). But next week, the Forum of Private Businesses wants the Government to put its money where its mouth is. In its pre-Budget submission to Chancellor Alistair Darling, the FPB calls for the planned rise in small companies’ tax and NI to be scrapped, claiming this would encourage more small firms to hire staff and grow - thereby dragging the UK out of recession. It also wants workplace legislation to be simplified. Sadly, given the Government’s threadbare coffers and fondness for red tape, we suspect both hopes may turn out to be forlorn...

The FPB has four main proposals for the Chancellor ahead of next week’s Budget. First, it wants the Government to review all workplace legislation and to simplify it wherever possible. Next on the wish-list is for the planned hikes to both small companies’ corporation tax and NI to be scrapped. Finally, it wants more clarity around the Revenue’s Business Payment Support System – a scheme that’s designed to help small firms but is largely failing to do so, because nobody really understands it.

If the Government gets this right, the FPB reckons, it will encourage small businesses to grow and take on more staff, which in turn will help the UK economy drag itself out of the mire. ‘By focusing on real change in a few key areas, the Government could help itself because small firms would then pull the country out of the economic doldrums,’ argues the FPB’s Matthew Goodman. OK, so he’s not exactly an impartial witness. But he may have a point: small businesses play a vital role in the labour market because they’re actually more likely to take people off the dole queue. So it makes sense to make that process easier.

But small businesses also have a role to play in the longer term success of the UK, says the FPB. Goodman argues that while it’s tempting for the Government to take more tax off small firms to help pay off our whopping national debt, in the long run it makes more sense not to. ‘Give businesses some certainty on compliance and let them keep more of their taxes for next year, and watch how the money starts to move again,’ he insists. ‘We all know that more businesses doing more trade and employing more people will lead to more income for the Treasury in the long run.’

Sadly, we fear these pleas may fall on deaf ears. Business groups have been calling for a lighter touch regime for small firms for years, and it hasn’t done much good. And the chances of the Government reversing the NI hike – a big potential revenue generator as we look to balance the books – seem slim, to say the least.


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