ICAEW Raises Concerns Over Implications Of UK Finance Bill For SMEs

by Jason Gorringe, Tax-News.com, London

11 May 2004

The Institute of Chartered Accountants of England and Wales (ICAEW) has submitted a long list of concerns to the UK government with regard to the "poor quality" of the drafting of Chancellor Gordon Brown's most recent Finance Bill.

Speaking to the Telegraph on Monday, ICAEW chairman, Mark Lee revealed that the additional nine pages of legislation required to rescind the Chancellor's zero percent corporate tax break for small companies, whilst appearing to retain the incentive in the interests of saving face, were of particular concern to SMEs.

The UK government was obliged to change the policy which allowed small companies to pay out the first £10,000 of profit tax free, after more than 600,000 businesses incorporated in order to take advantage of the tax break, costing it a substantial amount in lost tax revenues.

Under the terms of the most recent Finance Bill, small firms must now pay out a minimum 19% corporate tax on all of their profits, unless the money is retained for reinvestment.

However, Mr Lee suggested that the reinvestment provision was just put in place because the government "was unwilling to admit it had made a mistake".

"What's most concerning is that at a time when we and other professional bodies are calling for the tax system to be simplified and the Revenue response is complicated by clever accountants thinking up abusive tax avoidance schemes, the Revenue itself introduces nine pages of legislation not because of a clever avoidance scheme but because they want to save face," he told the Telegraph.

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