"Small firms win tax lifeline"

The Chancellor's decision to launch a wide-ranging review of small business taxation has received a cautious welcome, according to a report in The Telegraph.

Accountants said the Treasury had finally recognised that it needed to examine how to simplify the taxation of small businesses rather than tinker around the edges. Francesca Lagerberg, national head of taxation at accountant Smith & Williamson, said: "It's a bit of a sea change. In the past we have had some heavy handed legislative action."

The Treasury has been harshly criticised for its decision in 2002 to introduce a 0pc rate of corporation tax on the first £10,000 of profit generated by the smallest companies. Warnings that such an attractive tax break would encourage thousands of businesses to incorporate for non-commercial reasons were ignored.

When small firms responded by incorporating, the Chancellor reacted in his March Budget by attacking these companies, branding them tax avoiders, and closing what was described as a 'loophole'.

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Small firms win tax lifeline - Telegraph