In the aftermath of the Brexit vote, the economic risk we are seeing is that uncertainty is leading to inertia.
(PRWEB UK) 21 July 2016
These few weeks since the EU Referendum will go down in history as one of the most tumultuous periods in UK political history.
The country has a new Prime Minister and Chancellor of the Exchequer but the economic uncertainty created by the vote to leave European Union remains. This is especially true for the small businesses and entrepreneurs who, for instance, do not have the infrastructure and resources to hedge against their foreign currency exposure.
As a result, there is an urgent need for new Chancellor, Philip Hammond, to support enterprise. One positive action he should take is to restore the small profits rate of Corporation Tax.
According to Jon Cooper, the Tax Director at CooperFaure Accountants, “We provide accountancy support to businesses from an array of sectors. In the aftermath of the Brexit vote, the risk we are seeing is that uncertainty is leading to inertia.”
“The UK economy is at a pivotal moment where a return to recession is a real possibility and small business, in particular, needs to be supported through these turbulent times. Reinstating the small profits rate of Corporation Tax at 15% and locking this rate at 5% lower than the main rate would be a real boost.” Mr Cooper continued.
“We feel so passionately on this that we have launched a Parliamentary Petition in the belief that a groundswell of support will encourage the Chancellor and the government to adopt this policy.”
The small profits rate of Corporation Tax was first introduced in 1973 by the Conservative Chancellor, Anthony Barber. It is a salutary lesson of how times have changed as, at that time, the main rate of Corporation Tax was 52% and the small profits rate was 42%.
Over the next four decades, these differential rates were reduced until in the 2011-12 tax year, they were 26% and 20% respectively. In that year, companies with profits of up to £300,000 were entitled to this reduced rate with a marginal relief for companies with profits between £300,000 and £1,500,000.
Since then, the main rate of Corporation Tax has been steadily reduced but the small profit rate remained the same until, from 1st April 2015, essentially, there has been a harmonised rate Corporation Tax rate of 20%.
According to the House of Commons Library, in 2015 there were 5.4 million businesses in the UK. Of these, a staggering 5.1 million business, 95% of the total, are deemed to be micro-businesses with fewer than ten employees.
For the overwhelming majority of the incorporated businesses, the reality of the erosion of the small profits rate is that their last reduction in Corporation Tax was in 2011.
In these uncharted times, the government needs to support this lifeblood of the British economy that accounts for 33% of employment. Implementing this proposal would have a tangible impact.
If a Parliamentary Petition secures 10,000 signatures from British citizens or UK residents, this guarantees a government response and 100,000 signatures would mean that the proposal would be considered for debate in parliament.