Small Firms Call For Certainty In UK Tax System

by Jason Gorringe, Tax-News.com, London

06 July 2004

Backbench MPs and business groups last week attempted to convince the British government that the taxation system for small business is too complex and is in desperate need of simplification and certainty.

This was the message put across to the Paymaster General, Dawn Primarolo, at a meeting with the All Party Parliamentary Small Business Group last week as the minister responsible for the Inland Revenue was presented with the findings of a survey on the issue of small business taxation.

The survey, commissioned by the APPSBG and conducted by Dr Alan Southern of the University of Liverpool, attempted to ascertain from owners of small firms the reasons for their incorporation and the effects of frequent legal changes, such as the introduction of the 19% dividend tax, on their business.

Of the 500 firms which participated in the poll, the survey found 22% had recently changed their legal structure, with 67% moving from sole trader status. It also found that after tax, reducing financial risk was the most important reason to incorporate. Only 17% used this route to raise finance or expand, which Dr Southern noted runs counter to Chancellor Gordon Brown’s philosophy of encouraging incorporation to spur business development.

Whilst Brown announced in the last budget that a review is to be undertaken into the taxation of small firms, the government still appears to be in denial that there is a problem. A spokesperson for Primarolo was quoted as saying that the review does not denote that the government "thought the tax system was too complicated".

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