<b>Budget 2006:</b> The small print - The true cost of tinkering with company tax rates. By Nichola Ross Martin
Its official, the Chancellor has cost small business a minimum of £32 million per year in red tape, and this is just due to the introduction of the non-corporate distribution rate (NCDR) and starting rate of corporation tax.
The figure comes from a Regulatory Impact Assessment on Changes to the Corporation Tax Structure published with the budget. The RIA considers the impact of tax changes on small companies, notably the decision to abolish the NCDR and small companies rate. It costs corporation tax compliance out at a mere £50 per hour, which seems dubiously low.
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Ct and the small ones
For a short while small unregistered charities and social clubs (non-sports) had the welcome and only help from the Treasury of a nil rate of CT on what little non-mutual income came their way. It made quite a difference to some of these efforts that helped the local community. Now it's just swept away and Gordon never gave them a single thought.
the alternative is paying CT
based on some simple assumptions of 300,000 small businesses, let's say half make a profit and that profit is £5000 (half the 0% band). They will now pay CT at 19% whereas previously it would have been 0%, admittedly I'm not taking account of the NCDR.
This gives a total CT of £142.5m, just under 5 times the cost the red tape..... which is cheaper to business???
Whilst the NCDR may have caused some red tape, it was a fairer way to tax small business, ie those that retain profits to grow the business didn't pay tax, while those that chose to take the profit did pay tax. I'm dubious also about the saving, as the only difference will be to change the rate from 0% to 19% in the case of small companies.