FSB asks Government to lay off small firms

The Federation of Small Businesses (FSB) is urging the Government to lay off small businesses in the 2008 Budget, claiming it has displayed a 'huge ignorance' of the challenges small firms face.

In its annual submission to the Treasury the FSB firmly states its opposition to the Government's 'draconian attack' on the tax arrangements of family firms through its much-criticised income-shifting proposals.

The FSB calls for a rethink into the income-shifting proposals to prevent transferring sharing company income among family members and close contacts. This comes amid media speculation that the objections to the measure could force Chancellor Alistair Darling to water down his original proposals.

Taxation

The FSB says that its 2008 Budget Submission comes at a time when small business confidence in the Government is at its lowest ebb. The small business pressure group also reiterated how the Government's approach to the taxation of small businesses remains alarmingly disjointed and inconsistent.

The FSB made specific reference to IR35 and the continuing administrative problems it causes for freelancers.

In its submission to the Treasury, the FSB said:

• IR35 Legislation: Employment status continues to cause problems for small businesses and the IR35 legislation is continuing to cause administrative problems for professional contractors who have to operate through limited companies. The legislation favours large contractors and suppresses an important route from employment into entrepreneurship. It is an administrative burden for both HMRC and the self-employed and brings in little revenue.
  
• Income Shifting: The FSB is totally opposed to the proposed legislation on income shifting which will penalise family members who are legitimately in business together. The FSB is also very concerned about the increased administrative burden that the planned legislation will impose on businesses to prove involvement by both parties, and believes that the impact of this burden has been seriously understated in the Regulatory Impact Assessment.

John Wright, FSB National Chairman, said: "The past twelve months have seen small businesses receive a series of harsh body-blows from which they are still trying to recover. There was the increase in small business corporation tax in last April's budget, then there was the CGT fiasco – it cannot be stressed strongly enough just how important small businesses are to the UK economy. It is vital they are given more help to innovate and prosper. More hindrance will only see them, and the UK, shoved further backwards.

"The year has already begun with the threat of a recession which is difficult enough for small businesses to deal with, without having to contend with more obstacles put in the way by the Government. This wilting relationship between small businesses and the Government needs to be reinvigorated and March 12 will announce whether spring is in the air or whether frosty relations continue."

The Chancellor will deliver the Budget to Parliament on March 12. UKTECH will be providing comprehensive coverage on the issues which affect small businesses.