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Legal and Finance: Government 'starving the sole trader'.

The Government may be deliberately starving Britain's two million sole traders of beneficial tax breaks so they can keep a closer eye on them by forcing them to trade through a limited company, according to Simon Littlejohns, tax partner at accountants PKF West Midlands.

A sole trader is the most typical type of business owner in Britain, yet they pay 32 times more tax on business profits than incorporated businesses, of which there are 485,000 in the UK.

Traditionally, businesses use limited companies to obtain the protection of limited liability, spread ownership around the family or raise finance from third parties, but in recent years, the benefit of low tax rates on retained profits has proved a big incentive to incorporate. The Chancellor unveiled further impressive tax breaks for incorporated businesses but not sole traders in last year's Budget.

Key benefits now include: profits up to pounds 10,000 tax-free; 19 per cent small companies rate of corporation tax; ability to take NIC-free dividends.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Mar 7, 2003
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