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Annie Hayes



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Scrap NIC increase, says business group


A group representing 25,000 small to medium-sized firms has called for a one per cent increase in national insurance contributions to be reversed.

The Forum of Private Business (FPB) called on the Chancellor to relieve the taxation burden on smaller businesses in the Budget on 16 March.

Chief executive Nick Goulding said the FPB has told the Treasury consistently that tax is one of the main barriers to growth for the SME sector.

The NIC increase was implemented in April 2003. “The … hike of one per cent should be scrapped; it has proven to be a direct tax on jobs and actively hampers expansion,” Goulding claimed.

“Moreover, if Mr Brown committed to integrating PAYE and National Insurance, with an appropriate proportion of the tax designated as NI, this would significantly reduce the onerous administrative burden faced by smaller businesses, while maintaining the integrity of the NI fund.”

Employment status
Goulding said clarification of employment status rules would save smaller firms a considerable amount of time and money.

“Many smaller businesses face problems deciding on the appropriate structure for their business and the tax they will pay as a consequence.

“It causes bureaucratic problems, with evidence suggesting that businesses are spending approximately £2,000 a year on compliance. One solution would be to overhaul the issue of who is employed and who is self-employed. It really would be much more straightforward if self-certification of employment status was introduced.”

VAT loopholes
“Stealth taxes” are hitting business hard, Goulding added, but the FPB called for closure of VAT loopholes that “lead to unfair competitive advantages”.

Goulding stressed the importance of the SME sector to the UK’s economy. “It is vital the Chancellor addresses the issues that are constraining SME growth and shows that he supports the sector in this critical general election year Budget,” he said.

Minimum wage
The FPB pointed out that the national minimum wage had “increased by 34.7% over the last five years – a figure well above earnings growth”.

It urged the Chancellor to scrap the proposed increase to £5.05 an hour, announced by the DTI last month, and “ensure that future hikes will be linked to the retail price index”.

The DTI announced on 25 February that the latest rise was in line with the recommendation of the Low Pay Commission, and would take the minimum wage in 2006 to almost 50% above its rate in 1999.

It added: “Despite predictions to the contrary, the national minimum wage has not affected the job prospects of low-paid workers in the UK. Unemployment is at a record low and a record 28m people are now in work.”

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Annie Hayes


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