Government urged to simplify small business tax regime
The government has been urged to adopt an emblematic policy and simplify the small business tax regime.
Companies with revenue of under £1 million should be given the option to replace corporation tax, business rates, VAT and Employer’s National Insurance with a simple levy on turnover, charged on a cash basis: the Simple Consolidated Tax (SCT), the Centre for Policy Studies and Home Secretary Sajid Javid said in a recent report.
The report, ‘Think Small’, argues that while Britain has a very strong track record in terms of creating businesses, it is harder than it should be to run – and grow – one. In particular, small companies complain about the burden of tax and administration, which is costly in terms of both money and time.
It points out that 75 per cent of small business owners and managers polled on behalf of the CPS said the current system is too complicated.
Because the SCT would be voluntary, 'Think Small' suggest that no firm would have to lose out – those which would be worse off under the new system could simply keep to the old.
"Extensive modelling by Capital Economics shows that the SCT – for which there are encouraging precedents – would be revenue-neutral for the Treasury at a rate of between 11.5 per cent and 13.5 per cent, depending on the underlying assumptions used. The report suggests that its introduction could be phased in, to ensure the system was working as intended," the Centre for Policy Studies said in a statement.
In the final section of the report Nick King, head of business at the Centre for Policy Studies, also suggests a range of other measures that the government could adopt to help small businesses and sole traders, including a three-month National Insurance holiday on new hires for any business with eight or fewer employees and tax relief for self-funded training for sole traders.
"Small businesses are the backbone of the British economy making up more than 99% of all businesses, government has a duty to protect their interests so our economy can continue to thrive," said Mr King.
He warned that the current one size fits all model is failing small business, with too many of them are strangled by paperwork, bureaucracy and administration, costing them time and money.
"The polling commissioned for this report shows both the public and owners and managers of small businesses do not think the Government is on the side of small businesses – but that it should be.
"This report proposes a new ‘Simple Consolidated Tax’ which removes the need for the overwhelming amounts of paperwork and makes life so much simpler for small business owners. It offers a way for current Government to show it is truly backing small business and small business owners," said Mr King.