Fears are growing among business groups over the Government’s plans to overhaul the tax system for small businesses and the self-employed.
The Treasury is refusing to elaborate on proposals that are buried in the Budget and announced that a discussion paper, to be issued alongside the next Pre-Budget report, will look at “issues raised by the interaction with the tax system of the definitions of income, of self-employment and the remuneration paid to owner managers”.
Accountants fear the outcome of the review will be more taxes. The recent 19 per cent corporation tax on dividends announced in the Budget appears, they say, to be the first step in a wider clampdown on the small business sector.
Anne Redston, tax partner at Ernst & Young, the accountant, said that the Chancellor’s concerns about tax leakage were partly the result of his own generosity in previous years. “Through measures such as the abolition of advanced corporation tax and other measures designed to encourage enterprise, he has made it very attractive to be your own boss,” Ms Redston said. “But over the last two years the economic climate has not been so favourable and he is worried about tax leakage as a result of these measures now.”
Ms Redston believes that the overall aim of the review is to reduce the disparities in tax treatment between employees and the self-employed and added “The feeling about this review is that things are not going to get better for small businesses — only worse.”