Pressure mounts for small business tax cut

Alistair Darling, the UK chancellor, is under growing pressure to cut small business tax in his pre-Budget report later this month.

The facts:

MPs and small businesses are mocking the government’s pro-business stance because of its plans to increase corporation tax on small businesses in April next year.

The increase, announced by then-chancellor Gordon Brown in the 2007 Budget, would push up the tax for businesses with profits under £300,000 a year. Meanwhile, the one per cent increase, from 21 per cent to 22 per cent, would earn the government £450m annually.

A cross-parliamentary group of MPs including Labour backbenchers has signed a petition calling for the increase to be abolished. Meanwhile other groups including the Daily Mail Newspaper and the Federation of Small Businesses want the tax reduced to 19 per cent.

An under-pressure Alistair Darling will deliver his pre-Budget report on November 24, with expectations mounting of big measures to ease the financial crisis’ impact on consumers and small businesses.

Yesterday, Bank of England governor Mervyn King admitted that Britain was probably already in recession and that 2009 would be tough year. He refused to rule out cutting interest rates to zero – from three per cent currently – to fight the downturn.

They said:

“It is an awful tax hike when small businesses are in need of all the help they can get,” said Federation of Small Businesses spokesperson Stephen Alambritis.

“We cannot see how the government can say they want to do all they can to support small businesses, but hike taxes at the same time.”

Meanwhile, Conservative Treasury spokesman Justine Greening warned that the increase could send the rate of business failures higher: “This tax is the difference between some companies continuing in business or going under.”

We say:

Raising corporation tax for small business, while cutting them for bigger companies, caused outrage when the move was announced 18 months ago. But now the increase’s ‘live date’ is coinciding with a period of enormous hardship for small firms, it just seems cruel.

Small firms need liquidity of cash-flow to survive, cutting their profits will stop them investing for future growth and may dig into their contingency funds.

Why not sign up to our small business newsletter and learn more?

Rating

By News Desk  on   Nov 13,2008

Add a comment  |  Add a rating  |  Email to a friend

Keywords

Darling    Brown    corporation tax    small business    tax    Mervyn King   

Comments