Shadow Chancellor discusses small business tax

The meeting follows an earlier one in November 2007 when Mr Osborne signed the FPB's petition calling on the Government to reverse its decision to increase Capital Gains Tax (CGT) by removing entrepreneurs' taper relief, which had benefitted many of the FPB's members. It was held following research carried out in Referendum, the FPB's quarterly survey of members, in which a huge 97% of respondents said that the UK had become a worse place in which to do business as a result of the Government's tax regime.

Recently, the House of Lords' Finance Bill Committee analysed the UK's tax system. Its report observed that "the feeling that the system is unstable and subject to severe shock cannot be good for competitiveness of the UK economy". In particular, it criticised the sudden removal of indexation relief, by which CGT calculations were adjusted favourably to take account of inflation.

"The latest meeting went very well and confirmed that the FPB is on target in its lobbying activities," said Mr Orford. "We discussed tax simplification, energy security, including continuity of supply and stability of pricing, together with a variety of other issues. The FPB intends to hold further meetings with key decision-makers in order to ensure that the concerns of small businesses are prioritised."

The tax burden is one of the major concerns of small firms. The Government has raised the lower rate of Corporation Tax from 19% to 21% over the past 12 months, and it is set to increase it to 22% in April 2009. Conversely, the higher rate paid by bigger businesses is being cut from 30% to 28%.

The FPB believes that this tax burden is particularly onerous for small firms struggling to survive and grow because of the economic downturn. Following the creation of the Conservative Party's Small Business Taskforce, Mr Osborne revealed plans to cut small business tax to 20%. The move would be funded by a reduction in tax reliefs and capital allowances.

The Shadow Chancellor has also called for a cut in the higher rate of Corporation Tax, from 28% to 25% in order to stem the tide of UK entrepreneurs moving to countries with a more favourable tax regime. He has committed to simplifying the tax system, including giving advance warning and increasing the scrutiny of any proposed legal changes.

Following his meeting with the FPB, Mr Osborne said: "I believe that Government should be helping those running small businesses, not making their lives harder, as Gordon Brown has done. A new direction is needed – one that helps small companies grow, instead of strangling them at birth.
"This means making our tax system simpler, tackling the burden of red tape, and making sure that employers, small as well as large, have their say in education and training policies. Taken together, this package of measures would help Britain's smaller businesses succeed."

He added: "Life running a small business is never going to be easy – but I want the next Conservative Government to at least make it a little easier."

In a survey of the FPB's members ahead of the 2007 Comprehensive Spending Review, 67% of respondents said that reversing the decision to increase small firms' Corporation Tax would encourage them to reinvest in their businesses. Further, 49% indicated they would have extra funds to invest in skills and training, and 47% said they would be more likely to seek to grow their businesses.

The FPB, which is lobbying against disproportionate taxation as part of its ‘Think Smallest First' campaign, is asking its members to rate the barriers to growth of burdens such as tax and red tape as part of its latest Referendum survey.

FPB member Omar Ashlan, who owns Amador, an art gallery in Knutsford, in Mr Osborne's constituency, said: "The steady rise in the lower rate of Corporation Tax, while it is being cut for big business, combined with the Government's policies on tax incentives such as Capital Gains Tax taper relief and income shifting, has left business owners like myself feeling exasperated. I've met Mr Osborne in my gallery and I think he has listened to what I have said. I hope these proposals will lead to positive changes to the tax regime in particular."