by David Watkinson www.watkinsonblack.co.uk
We recently looked at some of the changes in taxation since 1999, one of which was the reduction in Corporation Tax for larger companies from 30% to the current rate of 20%.
However, the rate for smaller companies has remained static at 20%, whilst income tax has only fallen 3%, from 23% to 20%.
Whilst large companies are important to the economy perhaps it is time to remind the Chancellor that nearly 30% of all businesses are sole traders and partnerships, and according to the Office for National Statistics over 95% of all businesses have a turnover of below £2m per annum. Therefore, small businesses are fundamentally important to the UK economy.
Before the referendum vote, the Chancellor stated that if the vote was to leave the EU then there would be a speedy emergency budget that would both slash government spending and increase tax. We now learn that, far from increasing tax, the Chancellor is now suggesting that Corporation Tax, which is due to fall to 17% in 2020, may fall even further to 15%. He argues that it is important that Britain is competitive on the global stage.
Which brings us back to the point about the importance of small businesses to the UK economy. No doubt, if there was a major transfer of financial services from London then this would ultimately have repercussions in Warrington. Similarly, if car manufacturers transferred the development on new models from the UK factories then this would ultimately have repercussions in Warrington. However, the employment prospects, including self-employment, of many local people are more closely and immediately tied up primarily with those 95% of smaller businesses, 30% of which are unincorporated.
Over the past few years the UK government and their counterparts in Europe have been working to decrease the impact of “tax havens” on the total tax take. They have had some effect, although many people have complained that the changes are too little, too slow. It is important that this work continues to help pay for those much needed hospitals promised us by the “Brexit” camp. The last thing we want if for the UK itself to become a “tax haven” as warned by the Shadow Chancellor. That might help the bankers and other members of the “financial class” in London, but it will have little effect on the man in the street up here in Warrington.
Our plea to the Chancellor? Don’t forget the little guys!
WatkinsonBlack are pleased to advise on these and other matters. They have considerable experience in all areas of taxation and businesss services, including providing a very cost-effective payroll bureau service. If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
