Small business criticises corporation tax cuts for larger companies
Yet, many welcome ten-fold increase in capital investment allowance
The government has been criticised for failing to lower corporation tax for the UK’s small businesses.
Chancellor of the exchequer George Osborne revealed in the Autumn statement on December 5 that the main rate of corporation tax for businesses with a profit in excess of £300,000 will be reduced from 24% to 21% in April 2014.
However, corporation tax on smaller companies, with profits under £300,000 is set to stay at 20%, sparking criticism from small business owners including Nick Moore of We Trade It.
He said: “The announced cuts in corporation tax […] are encouraging for larger businesses and companies from outside of the UK looking to set up in Britain, but do little for our small business.
“With rising business rates, energy bills and employment costs, the challenge facing small local businesses is how to make taxable profits in the first place.”
Nonetheless, Osborne’s statement disclosed that the government will attempt to simplify tax for small, unincorporated businesses; those with annual receipts of up to £77,000 will be able to calculate their tax on a new cash basis.
John Walker, national chairman of the Federation of Small Businesses, welcomed the news: “Plans to move to a simpler ‘cash accounts’ system will bring huge deregulatory benefits to small businesses, and is something the FSB has long been calling for.”
Moreover, the £1bn Business Bank aims to support small businesses looking for finance, while a ten-fold increase in tax relief in capital investments is set to enable small business owners to claim back up to £250,000 per year for capital investments such as tools and equipment.
Debbie Griffiths, entrepreneurial business partner at professional service firm Deloitte commented: “With financing one of the biggest challenges facing entrepreneurs, moves to support SME funding through the Business Bank is a positive step forward.
“The ten-fold jump in the plant and machinery allowance from £25,000 to £250,000 is also significant.
“As a result of being able to claim this relief, it may accelerate capital expenditure programmes and provide more cash for investment and fund cashflow requirements of profitable SMEs.”