Alistair Darling's Budget will be bad for small business
By Richard Tyler, Enterprise Editor
Last Updated: 2:16am GMT 07/03/2008
The big losers in Alistair Darling's first Budget next week will be the millions of people running Britain's small and medium-sized businesses.
This crucial part of the economy faces paying several billion pounds more in tax in measures already announced by the Government and they will be hit by more if the Chancellor ignores the business world's pleas for no more nasty surprises.
Mr Darling will focus on the planned 2p cut from 30p to 28p in the headline rate of corporation tax, which is paid by companies earning more than £300,000 in profits. But the £2bn annual cost to the Treasury of this cut will be covered by a raft of other measures that will leave the Treasury collecting more tax from business owners than ever before.
For those running fast-growing firms and family businesses, allowances rewarding investment are being cut, while taxes on both profits and any increase in the value of the enterprise are being raised.
Lucy Findlay, head of enterprise policy at employers' body the CBI, says her members are furious. (AtW's comment: I am not a member, but I am ****ing livid!)
"They are pee'd off to hell," she says. "Their personal income and business tax is all mixed up. What affects the business, affects the family. It's a very emotional time."
Of all Budgets in recent years, she says that this year's is "hugely significant in the things that it will introduce, the financial impact and the loss of trust between small businesses and Government."
The CBI has called for a one-year delay in the tax clampdown on dividend payments made by family businesses and on the rise in capital gains tax. The Federation of Small Businesses, British Chambers of Commerce, Institute of Directors and other influential organisations are also lobbying to secure last- minute changes to the plans.
They have already successfully forced the Chancellor into offering a concession to his CGT reforms - the so-called ''Entrepreneurs' Relief" to the new 18pc rate which allows the first £1m to be taxed at 10pc. But few are holding out much hope of any further significant climbdowns.
The tax rises do not fall evenly. Some small business owners, such as those with hotels and guest houses, will be hit harder than others. Bob Cotton, chief executive of the British Hospitality and Restaurant Association, says a series of tax rises taking effect this April make this Budget the "most significant" in recent memory for his members.
Gordon Brown's Budget last year included radical reforms to the tax allowances given to business investing in their property. The reforms - presented as modernisation - take effect from April 6 this year and will raise an additional £3.12bn from 2009.
But the industry is angry that the cuts to the allowances apply to money already invested in new hotels, bedrooms and facilities. For instance, someone who built a hotel 10 years ago had expected to receive 4pc of the cost of the building each year for 25 years to write off against their taxable profits. From April 6, this will fall to 3pc and by 2011 it will be phased out altogether. Equally, the cost of fitting out a new kitchen would have been written off against profits at 25pc a year - from April 6 it will now only be 20pc a year. Integral fittings, such as loos and air conditioning systems, lose their 25pc allowance and will now only attract a 10pc annual allowance.
Thus, any hotel owner who has invested in expanding or refurbishing their business in the past 25 years is being penalised. Add in the CGT rise from 10pc to 18pc on business assets and the loss of indexation, which protected business assets from inflation between 1982 and 1998, and Mr Cotton says his industry has been stunned: "All these things have hammered investment in the sector just when it should be increasing."
Anita Montieth, head of the tax faculty at the Institute of Chartered Accountants in England and Wales, says the Government's decision to apply the hotel buildings allowance and CGT reforms retrospectively will undermine confidence in business incentives. "They will rightly ask, 'How can I guarantee the tax relief you are offering me will continue?' That's very damaging," she says.
Landlords are also coming to terms with changes to empty property relief, which exempted vacant industrial premises from business rates and reduce the rate due on office space. By cutting reliefs, the Treasury expects to raise £900m a year more by 2009. It expects this to increase competition.
However, companies such as Evans Easyspace, which provides flexible workshop space to small businesses, says the tax rise will have the opposite effect. It has had to cut the amount of space it wants to supply to pay the tax. As it offers short, flexible leases, it always has some empty premises in its estate.
Also rising is corporation tax paid by companies generating less than £300,000 in profit from 20p to 21p; a clampdown on the way family firms distribute their profits that will raise £200m a year; the rise in fuel duty (the Treasury expects to raise £660m a year from October's rise alone), and an escalation of the cost of dumping business waste in landfill. Next year, the Government plans to give councils new powers to raise supplementary business rates to pay for infrastructure projects.
The tax raids coincide with the launch next week of the Government's new ''Enterprise strategy" designed to encourage more people, particularly women, to set up and grow new enterprises.
To support this exercise, Mr Darling is expected to announce "one or two goodies" for small firms. But, whatever he announces, this year the burden of new taxation will still fall disproportionately on the engine room of the economy.
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It's this kind of attitude that made Americans revolt - the only wonder if why the heck the British are not revolting!
It is outrageous that they apply these things retrospectively - if they change CGT then it should have applied to new investment decisions only where as people who made them at the time old laws were in effect should be allow to carry their plans throuth.
By Richard Tyler, Enterprise Editor
Last Updated: 2:16am GMT 07/03/2008
The big losers in Alistair Darling's first Budget next week will be the millions of people running Britain's small and medium-sized businesses.
This crucial part of the economy faces paying several billion pounds more in tax in measures already announced by the Government and they will be hit by more if the Chancellor ignores the business world's pleas for no more nasty surprises.
Mr Darling will focus on the planned 2p cut from 30p to 28p in the headline rate of corporation tax, which is paid by companies earning more than £300,000 in profits. But the £2bn annual cost to the Treasury of this cut will be covered by a raft of other measures that will leave the Treasury collecting more tax from business owners than ever before.
For those running fast-growing firms and family businesses, allowances rewarding investment are being cut, while taxes on both profits and any increase in the value of the enterprise are being raised.
Lucy Findlay, head of enterprise policy at employers' body the CBI, says her members are furious. (AtW's comment: I am not a member, but I am ****ing livid!)
"They are pee'd off to hell," she says. "Their personal income and business tax is all mixed up. What affects the business, affects the family. It's a very emotional time."
Of all Budgets in recent years, she says that this year's is "hugely significant in the things that it will introduce, the financial impact and the loss of trust between small businesses and Government."
The CBI has called for a one-year delay in the tax clampdown on dividend payments made by family businesses and on the rise in capital gains tax. The Federation of Small Businesses, British Chambers of Commerce, Institute of Directors and other influential organisations are also lobbying to secure last- minute changes to the plans.
They have already successfully forced the Chancellor into offering a concession to his CGT reforms - the so-called ''Entrepreneurs' Relief" to the new 18pc rate which allows the first £1m to be taxed at 10pc. But few are holding out much hope of any further significant climbdowns.
The tax rises do not fall evenly. Some small business owners, such as those with hotels and guest houses, will be hit harder than others. Bob Cotton, chief executive of the British Hospitality and Restaurant Association, says a series of tax rises taking effect this April make this Budget the "most significant" in recent memory for his members.
Gordon Brown's Budget last year included radical reforms to the tax allowances given to business investing in their property. The reforms - presented as modernisation - take effect from April 6 this year and will raise an additional £3.12bn from 2009.
But the industry is angry that the cuts to the allowances apply to money already invested in new hotels, bedrooms and facilities. For instance, someone who built a hotel 10 years ago had expected to receive 4pc of the cost of the building each year for 25 years to write off against their taxable profits. From April 6, this will fall to 3pc and by 2011 it will be phased out altogether. Equally, the cost of fitting out a new kitchen would have been written off against profits at 25pc a year - from April 6 it will now only be 20pc a year. Integral fittings, such as loos and air conditioning systems, lose their 25pc allowance and will now only attract a 10pc annual allowance.
Thus, any hotel owner who has invested in expanding or refurbishing their business in the past 25 years is being penalised. Add in the CGT rise from 10pc to 18pc on business assets and the loss of indexation, which protected business assets from inflation between 1982 and 1998, and Mr Cotton says his industry has been stunned: "All these things have hammered investment in the sector just when it should be increasing."
Anita Montieth, head of the tax faculty at the Institute of Chartered Accountants in England and Wales, says the Government's decision to apply the hotel buildings allowance and CGT reforms retrospectively will undermine confidence in business incentives. "They will rightly ask, 'How can I guarantee the tax relief you are offering me will continue?' That's very damaging," she says.
Landlords are also coming to terms with changes to empty property relief, which exempted vacant industrial premises from business rates and reduce the rate due on office space. By cutting reliefs, the Treasury expects to raise £900m a year more by 2009. It expects this to increase competition.
However, companies such as Evans Easyspace, which provides flexible workshop space to small businesses, says the tax rise will have the opposite effect. It has had to cut the amount of space it wants to supply to pay the tax. As it offers short, flexible leases, it always has some empty premises in its estate.
Also rising is corporation tax paid by companies generating less than £300,000 in profit from 20p to 21p; a clampdown on the way family firms distribute their profits that will raise £200m a year; the rise in fuel duty (the Treasury expects to raise £660m a year from October's rise alone), and an escalation of the cost of dumping business waste in landfill. Next year, the Government plans to give councils new powers to raise supplementary business rates to pay for infrastructure projects.
The tax raids coincide with the launch next week of the Government's new ''Enterprise strategy" designed to encourage more people, particularly women, to set up and grow new enterprises.
To support this exercise, Mr Darling is expected to announce "one or two goodies" for small firms. But, whatever he announces, this year the burden of new taxation will still fall disproportionately on the engine room of the economy.
----
It's this kind of attitude that made Americans revolt - the only wonder if why the heck the British are not revolting!
It is outrageous that they apply these things retrospectively - if they change CGT then it should have applied to new investment decisions only where as people who made them at the time old laws were in effect should be allow to carry their plans throuth.
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