FPB proposes a tax environment that supports small businesses

19 November 2009

Email article : Print article : More articles like this

The FPB is lobbying the Government for a series of specific tax cuts as part of proposals for ‘responsible growth' as the economy heads out of recession.

The FPB is warning that the prospects for sustained economic recovery could be jeopardised unless small businesses are provided with an environment in which they can survive and grow. Consequently, a cornerstone of the Government's Pre-Budget Report on 9 December must be implementing substantial tax reliefs for SMEs.

According to the FPB's latest Referendum survey of members, more than a fifth (22%) of respondents want the Government to focus its policies on easing the burden of taxation.

Of those, almost a third (31%) cited the need for policies addressing business rates, while a quarter (23%) listed a cut in the headline rates of tax (National Insurance and payroll, VAT and Corporation Tax) as the most crucial change. In addition, 6% of respondents called for changes to fuel taxes.

"There is still a long and difficult road ahead of us, but small businesses are key drivers of the economy and the Government must create a tax environment in which they can thrive," said the FPB's Chief Executive, Phil Orford.

"That means tax relief in specific areas that would help to foster cash flow, innovation and employment opportunities so that small businesses are able to seize the opportunities that will emerge as the economy emerges from recession."

The FPB's specific tax proposals are as follows:

Cut Corporation Tax

The FPB is calling for a reversal in plans to increase small firms' Corporation Tax, which should instead be cut to 20%.

With profits still low and margins tight for many small businesses, a reduction in Corporation Tax could benefit a large number of businesses in exchange for a marginal cost to the Government.

Create NI holiday

Further, a 12-month reduction in National Insurance Contributions (NICs) for businesses with fewer than 10 employees which take on new staff, and a delay in the planned 0.5% increase in NICs scheduled for 2011, would make it much easier for smaller employers to recruit and be better able to meet existing demand.

Reduce VAT for labour-intensive services

With the approval in May of the European Commission's proposal on reduced VAT rates, the FPB is urging the Government to explore opportunities to stimulate the economy by reducing VAT in some overlooked business sectors.

Reducing VAT to 5% on selected labour-intensive services, including hairdressing and home renovation and repair, would stimulate demand and lead to an increase in trade for many businesses, in turn leading to an increase in employment. An added benefit to Government coffers would be to bring a significant number of small businesses over the VAT threshold.

Delay planned VAT increase

In addition, the timing of the return of the VAT rate to 17.5% at the stroke of midnight on 1 January would require a disproportionate and difficult set of administrative changes. The FPB is calling on the Government to be delayed for a reasonable period of time to help small businesses cope.

Automatic enrolment for Small Business Rate Relief

Small businesses should receive the money that has been earmarked to help them deal with the burden of non-domestic rates.

Research from the Local Government Association (LGA) suggest that fewer than half of the 870,000 small businesses across England which qualify for the scheme have applied for it.

sss

FPB proposes a tax environment that supports small businesses

Related articles