Budget (11): Conservatives plan challenge

Shadow Paymaster General Mark Prisk MP called on UKTECH readers to provide information about how the new Budget measures will affect them, to help the Conservatives challenge the Government on its proposals.

In an exclusive interview with UKTECH, Mark Prisk, himself a former freelancer, said that he felt that small businesses were encouraged into incorporation by the Government and were now being forced to pay the price. He described it as a mess created by the Government who was now trying to close a perceived loophole, which is of their own making.

The 'dividend tax' was one of several options which the Chancellor could have taken after he made his intentions clear in the Pre Budget Report in December 2003 when he said that he intended to introduce measures 'to ensure small companies paid the right amount of tax.

Mark Prisk said: "The scheme they have chosen isn't the worst. The Government could have gone for NI or another measure but have chosen to introduce tax on dividends.

"It is not quite as punitive as it could have been. They have gone for the simpler option without affecting the company structure but have left in place IR35 and strengthened Section 660.

"A few years ago the Government was encouraging small businesses to incorporate. Now it has decided to close what they see as a loophole. But it is a loophole of their own making.

"That has left these small businesses caught in a trap. They have already incurred the cost of incorporating; there will be additional costs if they remain incorporated; and they would incur costs if they tried to get out of incorporated status. Yet it was the Government which pushed them in this direction in the first place.

"This is a classic example of meddling in the tax system; distorting the way small businesses operate; and making entrepreneurs pay for the mess the Government created.

"It is extremely unfair for these small businesses."

UKTECH call

Many of the measures outlined in the Budget become law through passage of the Finance Bill. The precise detail will be known when the Bill is published and amendments can then be added during its Parliamentary passage in the next few months.

As Shadow Paymaster General (Dawn Primarolo's opposite number) it is likely that Mark Prisk will lead for the Opposition in some of the debates. He has asked any members of the UKTECH network who have examples of the damage this and other measures have done or will do to their businesses to help him challenge the Government during the debates on the Bill.

Mark Prisk said: "I would ask those freelancers who subscribe to UKTECH to let me know their position so that we can continue to pursue this. Is it going to hurt their business? If so, how?"

He has asked UKTECH to collate any information and let him have examples by Easter. If you want to provide details, please post comments here and I will summarise them for Mark Prisk's Shadow Treasury team.