Lack of consultation on small business review

The Government has come under fire for a lack of consultation with the small business community during its review of owner managed businesses.

In the March 2004 Budget, the Chancellor, Gordon Brown, announced that: 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 the income of self-employment, and the remuneration paid to owner managers.

It was widely expected - or hoped - that the Government would seek out the views of small businesses; their representative bodies and professional advisers as part of this review.

However, it now appears that this is more of an 'internal review', the results of which, will be announced at the Pre-Budget Report in November.

This follows the format of several other measures affecting small businesses which the Government has introduced without consultation. At the time of the introduction of IR35, the Treasury was widely criticised for not listening to the small business community. Professional advisers have strongly registered their disapproval of the interpretation of the settlements legislation, Section 660, but have been largely ignored. The introduction of the zero rate on company profits, IR591 or the dividend tax, was a Government initiative to close a perceived loop-hole it had introduced 18 months previously as an incentive, and was advised of the potential problems at the time.

Rather than the piece-meal approach which has typified the Government's taxation policy on small businesses, it was believed that this current review would take a step back and consider the wider implications of all issues relating to owner-managed companies.

However, information relating to this review has been sparse and it was recently reported that it would not include IR35.

Lack of consultation

Professional advisers and representative bodies believed that there would be 'informal discussions' before the Government issued the discussion paper. But it is becoming clear that the Treasury will be relying on its own resources, which were also responsible for IR35, IR591 and other contentious issues, rather than the wider expertise and experience within the small business community.