Categorized | ir35 rules, news

Small businesses need clarity regarding proposed tax changes

Small businesses need clarity regarding proposed tax changes

Small businesses and contractor accountants are still in the dark as to whether the new government has set out a coherent plan that will enable them to survive the current economic conditions.

There are around 4.8 million small companies and limited company contractors in the UK and although the Lib-Con coalition has announced a deluge of proposals, the lack of clarity has left an air of uncertainty amongst the business community.

The coalition talks of simplifying and reviewing the small business landscape but it has not disclosed the finer details. A wholesale review of IR35 and all the other small business taxes is going to take place. This aims to prevent tax avoidance and decrease the administrative burdens on SMEs.

Whilst this sounds good in theory, some experts question whether it will work in practice. One area that has not been addressed in the coalition’s plan is the difference in NIC rates paid by employees and self employed workers.

Manufacturers, for example, are already concerned that simplification will mean scrapping the allowances that benefit their sector. Vince Cable, the business secretary, has been lobbying for a preservation of these allowances saying that without them manufacturers will not be able to purchase the machinery they need.

Experts also believe that the capital gains tax rise on non-business assets is bad for businesses. It has not yet been confirmed how much the rise will be and there is no guarantee that entrepreneurs will be exempt from the rise.

Although corporation tax is expected to fall by 1% to 20%, this move also has hidden pitfalls which could leave the very people it is meant to benefit at a disadvantage.

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Image: We just wanna scream it louder and louder! by cristian_may

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