| Shadow Chancellor George Osborne has announced that he is developing a "radical" package of measures aimed at cutting and simplifying tax for small business.
Addressing an event sponsored by the Chartered Institute for Personnel and Development and the British Chambers of Commerce, Osborne said that the package would enable an incoming Conservative government to simplify the administration of income tax and national insurance, and reform the administration of VAT. He also pledged that the Party would seek to reverse changes to small business taxation introduced by current Chancellor Gordon Brown in his last budget.
"In his last Budget, Gordon Brown increased the tax rate on small businesses from 19% to 22%. This was the third increase in three years. The Chancellor also introduced yet another set of complex tax reliefs that most start-up companies won't actually be eligible for," Osborne stated.
"If his past tax reliefs are anything to go by, even the companies that could claim the relief won't be able to afford the tax advisers they need to do so," he added.
While Brown cut the headline rate of corporate tax in the last budget by 2% to 28%, the Chancellor confounded the small business community by increasing the rate of corporate tax for small companies with profits up to GBP300,000 per year by 3% over the next two years, in a bid to ensure "fairness across the tax system". This will entail a 1% increase from April 2007, another 1% hike in April 2008 and a final 1% increase in April 2009. The Treasury has jusitified this move by saying tht it will thwart "tax motivated incorporation" and support initiatives towards "refocusing incentives for small businesses towards those businesses that reinvest", but tax experts argue that the move sends conflicting signals about government policy in this area.
"The Conservative Party will continue to oppose the Chancellor's latest tax rise for small businesses," Osborne declared. "We are fighting this measure every step of the way in Parliament. Should we fail to defeat Labour on this, we will look very carefully at how we can reverse the increase in the tax rate."
(Tax-News.com)
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