Government has been urged to simplify the current small business tax regime, replacing myriad taxes with a levy on turnover.
Free-market think tank the Centre for Policy Studies argues that small and family businesses with revenue of under £1m should be given the option to replace corporation tax, business rates, VAT and employer’s National Insurance with a “simple consolidated tax”.
Home Secretary Sajid Javid was due to launch the Think Small report in London today. The report is written by Nick King, former special adviser to Javid when he was business secretary.
According to a YouGov poll commissioned for the report, 75pc of small business owners believe the current tax regime is too complicated.
Seventy-two per cent out of more than 2,000 SME owners and managers said they would move to a simple turnover tax if the amount of tax they had to pay remained the same, because of its simplicity. More than a quarter of respondents said they’d move to the new system even if it meant paying more tax.
From the Treasury’s viewpoint, a SCT would raise the same amount of money as current arrangements, while SME owners who found themselves paying more under the new system could revert to the old, to ensure they don’t lose out.
The CPS report also calls for:
- A three-month National Insurance holiday on new hires for any business with eight or fewer employees.
- Tax relief for self-funded training for sole traders.
Sixty-two per cent of small businesses do not believe government is on the side of small business, says the report, while 68pc say the current tax system is not sympathetic towards the needs of entrepreneurs.
Nick King, head of business at the CPS, said: “Small businesses are the backbone of the British economy making up more than 99pc of all businesses; government has a duty to protect their interests so our economy can continue to thrive.
“This report proposes a new ‘simple consolidated tax’ which removes the need for the overwhelming amounts of paperwork and makes life so much simpler for small business owners. It offers a way for current Government to show it is truly backing small business and small business owners.”
Andy Street, former managing director of John Lewis and mayor of the West Midlands, said: “I strongly urge the government to examine the central recommendation, The SCT which would offer a significant simplification of the tax landscape for small firms, and many of the other ideas in this report would be hugely welcome.”
How can my small business make the most of tax reliefs available?