It’s that time of year again when thoughts turn to the budget. Inevitably, I’m wondering what George Osborne has up his sleeve to cheer up business and stimulate the economy. So I thought it might be useful to write down my thoughts ahead of 21 March and compile a personal wish list.
I want to encourage entrepreneurship and I know that the government does, too. So how can we get more new businesses going and make it easier for existing ones to expand?
It seems to me that the Treasury has an obsession with the corporate form. So many tax reliefs are only available to businesses set up as companies and to people who invest in companies. Yet the administration involved in running a company is a pain in the neck. It is time-consuming and expensive, and filing the annual corporation tax return online along with its accounts and computations is a real challenge.
Clive Parritt, ICAEW president
how can we get more new businesses going and make it easier for existing ones to expand?
We have so many talented young people graduating from universities without jobs. Designers can be seen at markets and craft fairs throughout the UK. Web designers, musicians and hairdressers all need seed finance. How about encouraging people to lend money to them without making them incorporate their business first? The banks won’t lend anyway (too risky), but friends and relatives might and maybe we could provide some encouragement through the tax system?
And what about making it easier for small businesses to take on more staff? This is an enormous hurdle and one that often puts the brakes on their expansion. The National Insurance holiday is a start. But why not also stop the relentless bureaucratic drive to force people into the PAYE system?
It shouldn’t matter whether a worker is employed or self-employed. Sure, there are NIC implications. But while the rationalisation of PAYE and NIC is being addressed at the moment by the Office for Tax Simplification, it needs speeding up.
How about encouraging business investment? Why not cut capital gains tax back to 10%? Or, if that’s considered too radical, what about cutting it to 10% for all employees who invest in the business?
The current system is a mess. If I am an owner-manager and I have 5% of the business, I can pay only 10% tax. However, if I own 4.9999%, I pay 28% because I have just failed the 5% cliff-edge ownership test. If I am an ordinary employee and I have acquired a 0.5% share in the business, then I also pay 28%. I think that’s wrong. If an employee has shown commitment by putting money into the business – and is lucky enough to make a profit – they should get the same benefit as larger shareholders.