Today Gordon Brown takes over from Tony Blair as Prime Minister. I’m sure many SMEs will be wondering how the change will impact on them. It’s likely that few will see it as a positive step. As chancellor Brown’s continually taken from small businesses while giving to big business. The last budget being a perfect example as he lowered corporation tax for big business by 2% while introducing a 3% hike in tax for small businesses.

While I believe that a reduction in corporation taxes for big business is a good move, as it makes the UK a more attractive place to do business – it has long been argued that by reducing the corporation tax levels and simplifying the overall tax rules a government could stimulate significant growth in the economy (both from companies moving to the UK and increase competitiveness of UK businesses) and actually collect more tax as a result of higher profits being realised by more businesses. It should not however be acompanied by an attack on small businesses which according to the DTI make up 99.3% of UK businesses accounting for 58.7% of UK jobs and 51.1% of the GDP.

Under New Labour and Gordon Browns tenure as the Chancellor the amount of red tape faced by businesses has increased significantly. According to a survey by KashFlow:

…nearly 40% of accountants believe that the biggest barrier to growth of small businesses in the UK is red tape.

and

Nearly 70% of accountants asked say that they see David Cameron as the better option to Gordon Brown when it comes to lowering the legislative barriers that prevent small businesses from growing.

In his earlier years Brown was accused of introducing a “tax on jobs” when he increased National Insurance rates increasing the cost of employing staff by 1%. He also increased income tax in the same budget, but dishonestly called it an increase in Employees National Insurance despite the fact that unlike National Insurance the 1% applied to all earned income over the personal allowance, instead of being capped as National Insurance payments are.

Several years ago he introduced a low rate of corporation tax, despite advice from the accounting industry that it would cause large numbers of self-employed businesses to incorporate to take advantage of the new rate. Of course once they actually did incorporate he decided it was being abused by self-employed people and withdrew it.

He has also presided over repeated determined attempts to reclassify self-employed people as employees, a status that generally involves paying more tax. It’s also such a complicated mess that not even HMRC seem able to understand it.

By the looks of it he’ll shortly be hitting small businesses again as the FSB reportsthat:

ENTREPRENEURS and family companies are increasingly looking at selling their businesses, fearful that one of Gordon Brown’s first acts as Prime Minister will be to clamp down on capital gains tax relief.

While the move by Brown, who takes over from Tony Blair this week, is aimed at squeezing the controversial tax break enjoyed by private equity firms, small businesses could also be hit.

I wonder if doing anything to target private equity is advisable, after all their profits typically come from investing in growing businesses – something crucial to an entrepreneurial Britain.

Let’s hope the next general election brings better prospects for Britain’s small businesses.

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