PBR 2007: Small business taxation. By Nichola Ross Martin
Poor old small business! The Pre-Budget Report does not give much encouragement to do anything other than sell up, it seems. Where did things all go so badly wrong?
We all know that the root cause of the anti-small business strategy lay in the introduction of the 0% starting rate for corporation tax. This positively encouraged enterprise as the resultant rash of incorporations amply illustrated. Unfortunately, these were illustrative of the wrong sort of "enterprise" and it was unlikely that any chancellor to continue commending such tax breaks to the House.
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It's a question of interpretation...
Labour wants to be seen as friendly to business but interprets this a BIG business hence the helpful proposals made by David Varney which are being implemented - of course as long as your transaction is valued at more than £250m.
But Labour abdicated all control over the revenue service some years ago preferring to allow it to root out evil avoidance wherever it could be found - and of course its much easier to hit small taxpayers who don't have the resources of Cadbury Schweppes or Marks and Sparks hence the revenue enthusiasm for countering the perceived abuse by companies like Arctic Systems, aided and abetted by an incredibly traditional and blinkered approach by the House of Lords which simply (it seems) accepted without question that there was a settlement in this case but allowed the taxpayers to win on a technicality which the revenue now seek to counteract even though there is clear evidence that the government who introduced independent taxation intended that income splitting should occur. That should be sufficient for the revenue - the government that introduced the legislation intended that income splitting should occur. Accept it. If you want to change it accept that that is a change of policy and persuade the government to introduce it as such with justification. That is the fair way. But Labour don't behave like that - they give HMRC the freedom to do whatever they want, as they (Gordon) abdicated control of the economy to the Bank of England who acted so admirably over Northern Rock.
Small businesses are seen as a nuisance and little more - mark my words the writing will be on the wall when Gordon Browns hand moves Alistair Darlings mouth to form the words "I've appointed a Tsar to protect small business interests" - nooooooo!
Related may come from Sch 28AA
I assume the reference to "related" companies corresponds to the term as used in the transfer pricing rules in Schedule 28AA. Perhaps this indicates an intention to use this as the measure of "association".