Enterprise: Devil is in the detail for independent entrepreneurs.
When a Chancellor announces help for small businesses, we are all delighted, but those of a more cautious nature or those who have been around for a long time can be heard muttering 'The devil's in the detail'.
We are usually right. The announcement by Chancellor Gordon Brown in the last Budget that he was intending to help small businesses through the tax system was one such event.
The Chancellor announced that the first pounds 10,000 of profit would be tax-free for small incorporated businesses and tax on profits between pounds 10,000 and pounds 300,000 would be reduced by one per cent.
Wonderful. So where's the devil? Well it wasn't even in the detail - it was right there in the announcement - incorporated, you might say.
This was very welcome news for nearly half a million small incorporated businesses, but it does not help the millions of self employed people who do not gain through this generous move. Indeed, it works against them. A few years ago, a Government catch phrase that we heard on every minister's lips was 'a level playing field'.
The Chancellor's move hasn't just made the playing field a bit bumpy for the unincorporated - it has effectively put a very big uphill slope on it.
On profits of pounds 15,000, a self employed person pays a combined income tax and National Insurance bill of pounds 2,884 - thirty two times more than the pounds 91 paid by a limited company in corporation tax.
On profits of more than pounds 30,000, a self employed person pays combined income tax and National Insurance of pounds 7,234, compared to the pounds 3,645 in corporation tax paid by a limited company.
Gordon Brown is a highly intelligent man well served by his advisers in the Treasury, so why would he make this distinction so obviously unfair to so many people?
Well, one view would be that it is to force all self employed people into becoming incorporated limited companies, a sector that is more easily policed by the various inspectors who call to check the workings of the entrepreneur.
This Government has a passion for control of every detail. Where it is able to control the workings of an organisation, it does it through target setting, box ticking and, of course, funding.
How to control a huge collection of rugged individualists who are prepared to take risks and work for their independence? 'Money', they cry. 'That way we can gather them all in, get them all into one tidy sector where we can control them.
'We'll bribe them. Once they are all limited companies, we can stop the tax incentives and use our new-found control as we please.'
Well, it won't work chaps, you've been rumbled!
The Federation of Small Businesses has been gathering the evidence on the Chancellor's move and believes many businesses are being driven into incorporated status for the wrong reasons.
No one should be forced into making business decisions that do not suit their circumstances.
If the Chancellor wishes to encourage small business and start up businesses, he must deliver tax relief across the whole field of small businesses. When businesses are ready to make such decisions, many will decide to become incorporated for good business reasons. There are enough rocks on the road to success without adding more.
This country depends on its entrepreneurs for jobs, revenue and innovation.
Small businesses are driven by a desire to grow bigger and they need help to do this, not hoops to jump through on the way.
It has been said that if Bill Gates started his business in this country, he'd be the biggest firm in Solihull by now.
Think about it, Mr Brown, and give your movers and shakers space to get on and grow at their own pace in their own time. You will profit in the end.
Diane Rayner is area policy officer for the West Midlands Federation of Small Businesses
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|Publication:||The Birmingham Post (England)|
|Date:||Feb 5, 2003|
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