Small business on Pre Budget wish-list

Business and financial advisers Grant Thornton produced a Pre-Budget Report (PBR) wish list for businesses and a request that some of the more idiosyncratic pieces of legislation may be eradicated, including a special plea for small business.

Small business

Grant Thornton called on the Chancellor to 'make the tax treatment of small businesses fair'. The Government has previously said that it wants to ensure that it provides targeted tax incentives to support its objectives for growing small businesses and the self-employed sector.

It announced a review of this sector in paragraph 5.95 of the 2004 Budget and the outcome is expected in the Pre-Budget Report due in November or December 2004. However, there has already been criticism for the Treasury's lack of external consultation in this review.

Grant Thornton said: "If the Government's desire is to encourage entrepreneurship, then it must provide tax incentives which are genuinely fair to those people starting up on their own by introducing tax rates that are lower than those which apply to company employees."

Tax partner, Clare Hartnell added: "Currently there is not a level playing field between those entrepreneurs choosing to operate on a self-employed basis and those operating via the medium of a company. Lowering the tax rates for all small firms will incentivise ordinary people to break the mould of being an employee and help them to do extraordinary things.

"Furthermore the tax relief currently available only to companies such as R&D tax credits, should be extended to self-employed people and partnerships. The Revenue should recognise that these businesses are key to creating wealth for the nation, and aligning the tax rates for small businesses could be a step in the right direction if the rates are set at the right level."

Other measures

Grant Thornton also called for:

• an overhaul of the capital gains tax and taper relief regime and for it to be replaced with a simpler system;
  
• the introduction of Property Investment Funds (PIFs) that will provide incentives to encourage investment; and
  
• clearing up discrepancies in the tax treatment of benefits relating to "e-enablement". For example, if an employer arranges a broadband connection at an employee's home, then there is no benefit (for tax purposes) provided any private use is incidental. However, if the employee arranges for the installation of broadband, and the employer reimburses, then the employee cannot obtain a tax deduction if he is able to use the internet for non-business purposes. Clare Hartnell said: "With more flexible working, and more people working from home, surely it is time for the legislation to 'get real' and reflect commercial reality."