Budget (4) – Summary 'Protecting Revenues'

The Treasury has published a summary of its ‘Small business tax incentives’ in one of its papers released immediately after the Budget.

In PN5, ‘Protecting Revenues’ it says the Chancellor announced ‘a package of measures to tackle the problem of tax avoidance, protect revenues for investment in public services and maintain the integrity of the tax system.’

It says:

The Government is committed to support for all types of small business, and believes that transition to the corporate legal form can be an important step in the development of a business. At the same time the Government wants to ensure that the support provided for small companies to promote growth and enterprise does not encourage businesses to incorporate solely for tax reasons.

As set out in the 2003 Pre-Budget Report, the Government announces specific proposals to ensure that the measures it has introduced provide support for businesses that reinvest their profits and grow their businesses. The Government will also take steps to reinforce compliance with the tax system by the smallest companies, while ensuring that compliant businesses do not face additional burdens.

The measures announced today are:

• a minimum corporation tax rate of 19 per cent on profits distributed to individuals on or after 1 April 2004, with the zero-rate on retained profit remaining to incentivise businesses to re-invest;
• the requirement for newly incorporated businesses to disclose basic tax information will be strengthened; and
• the extension, for one year from 1 April 2004, of first year allowances for small enterprises from 40 per cent to 50 per cent, to provide a cash flow boost to up to 3.8 million small enterprises when they need it most.

The Government will also consider measures to strengthen anti-avoidance legislation on loans made to shareholder directors of close companies.

To ensure that targeted tax incentives support the Government's objectives for growth, enterprise and productivity, the Government proposes to consider the issues raised by the interaction with the tax system of definitions of income of self-employment, and the remuneration paid to owner-managers, in a discussion paper which will be issued at the time of the 2004 Pre-Budget Report.

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