2009-12-09

By Editor, CIR

The Forum of Private Business (FPB) described the move as a 'tax on employment' which will hit small firms hard and hinder employment.

The FPB welcomed some aspects of the PBR, including extensions to the Enterprise Finance Guarantee fund, the 'Time to Pay' tax payment scheme and empty property rates relief. It also welcomed the freeze on corporation tax for small businesses and the introduction of reduced taxation on profits stemming from patents.

However, the FPB believes that raising NICs by another 0.5% in 2011 is grossly unfair and will leave small employers and their employees paying the price for mistakes made by global financial institutions.

FPB chief executive Phil Orford said: "This tax hike will come at the worst possible time for small firms -- just at the point where, hopefully, the economy will be in recovery and they will be looking into taking on new staff.

"Putting a tax on employment isn't the way to reduce the public debt - it will stop businesses from growing, restrict job creation and take more money from potential consumers who would otherwise put it back into the economy."

Mr Orford added: "The Chancellor did announce extensions to several small business-friendly schemes, and of course we applaud that. But those schemes will help just a small proportion of small firms, where as this tax rise will hit almost all of them. In a recent survey, almost a third of our members said that the original NI increase would be 'very damaging' to their businesses and only 4% described it as 'affordable', so this further increase will no doubt be met with dismay."

Mr Orford described the wider PBR announcement as 'uninspiring' and said more could have been done for small firms.

He welcomed Mr Darling's acknowledgement of the credit problems faced by many small firms and the extension of the EFG scheme, which guarantees loans to small firms.

However, Mr Orford pointed out that less than 6,000 firms had been able to take advantage of it, out of an estimated 1.2 million SME employers in the UK. Meanwhile, only around 60% of its original value had so far been drawn down.

The FPB has previously called for the effectiveness of the scheme to be continuously reviewed in order to extend its reach to more credit-starved SMEs.

Mr Orford said: "The EFG scheme and the new Growth Capital Fund are of course positive steps towards helping small businesses survive the recession and grow. The sensible decision not to increase corporation tax for smaller companies, the extension of the Time to Pay tax deferral scheme and the continuation of rate relief for empty properties are also welcome measures.

"However, our members were hoping this PBR would lay the foundations of a bold new tax and regulatory environment which would help small businesses prosper and grow.

"Our submission to the PBR had three key proposals -- a comprehensive regulatory review looking at slashing red tape, the scrapping of the planned increase to corporation tax for small companies, and breaks in NICs for micro-businesses to encourage them to take on staff.

"Sadly, only one of those proposals has been taken on board and, instead of reductions in National Insurance costs, we've seen a rise.

"This is hugely disappointing -- it's a case of business as usual and it's not enough."

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