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SME policy paper suggests tax reform

19 Mar 2007

ACCA has set out a Budget agenda of practical suggestions to reform the tax system to benefit the UK's Small and Medium-Sized Enterprise (SME) sector, ahead of Wednesday's UK Budget announcement.
 
Robin Jarvis, ACCA's head of small business, said: "Small businesses are the bedrock of the British economy and Mr Brown's final budget gives him a chance to make an important legacy - a programme of reforms which will provide genuine and lasting assistance to this sector. We have provided a list of practical ideas covering tax regulation and business finance, which would not cost the earth, but would address the main areas that SMEs tell us would be of real assistance."
 
Areas covered by ACCA's UK SME policy paper include:

• Updating the UK government's 'welfare to work' strategy to encourage more business start-ups as a way into self-employment and incentivising SMEs to take on long-term unemployed by sharing the risk with government
• Urgently addressing the technical differences between PAYE and NIC rules, which cause SMEs headaches in payroll administration, by merging the two accounting systems. With an imminent National Pensions Savings Scheme, SMEs face a three-tier payment system unless action is take
• Raising the Community Investment Tax Relief (CITR) scheme limits, which have held back investment under these schemes. This would help provide more finance for entrepreneurs in deprived areas
• Improving Business Angel finance for SMEs by simplifying the tax relief given under the Enterprise Investment Scheme, which investors argue is over-complex, and under which relief is lost if it is re-invested in further growth finance. Serial entrepreneurship should be encouraged.  
• The UK tax system currently encourages small businesses to incorporate when this might not be the best course of action for them. Equal taxation of different legal structures should be introduced and disincorporation should not attract a capital gains tax hit.  

Chas Roy-Chowdhury, ACCA's Head of Taxation added: "Short-term tax policies and constant changes in compliance requirements are harmful to small businesses, which need stability to plan, and damage the relationship between taxpayer and tax system. We urge the Chancellor in his final budget to provide a lasting legacy of help for the 99% of UK businesses which make up the SME sector."