Richard Baron, head of taxation at the Institute of Directors (IoD) looks at what the budget will mean for small businesses
For many, the most significant announcement in Budget 2008 will be the postponement of the proposals on income shifting to 2009, to allow more time for consultation. The measure has not been discarded: we definitely will see something next year. But at least we now have scope to press for something more sensible than the original proposals.
Small businesses have long complained, and rightly, about the administrative burdens which the tax system imposes. The government announced some simplification initiatives in the Pre-Budget Report, and the one on associated companies is now bearing fruit. The risk of one person's companies being treated as associated with another person's companies because both happen to have invested in a single partnership will be greatly reduced. This is good, as are the other simplifications that were announced in the Budget. But we do need to see dramatic progress if business owners are to be left free to do real work rather than spend their time form-filling.
One radical idea is being floated: a simplified regime for computing corporation tax for small companies. One suggestion is to align taxable profits more closely with accounting profits. The IoD will be participating fully in this review. But getting something that works will not be easy. The idea has been considered several times over the years.
On capital gains tax we did not see anything more that would help businesses, beyond the entrepreneurs' relief that was announced in January. This relief will help, but the overall package will still impose a substantial new tax burden.
Changes to the taxation of the non-domiciled are still worrying. One helpful change is that the limit on overseas income that can be ignored is to be doubled from £1,000 to £2,000. This may ease the position of migrant workers who have small amounts of non-UK income, and therefore make life easier for their UK employers. The other notable change is on residence. People who do not live in the UK but who come here often for business were faced with the prospect of having days of arrival and departure both treated as days in the UK. Now only the day of arrival will be treated as a day in the UK.
Posted 13 March 2008 : Director.co.uk