Finance Bill

My hon. Friend makes a valid and important point about the widespread impact of the Budget on small companies, but I will not be tempted down that route as it falls outside the scope of clause 3. I am sure that his point will be heard by those groups that take a close interest in the matter. I was talking about the use and take-up of reliefs and their growing complexity. To offset the increase in corporation tax, small companies will have carefully to consider how they can claim R and D tax credits or capital allowances and will have to navigate their way through a complex system. A poll of members of the British Chambers of Commerce said that 69 per cent. believed that business taxes should be streamlined so that taxes were lower overall and so that the system of tax allowances and exemptions was abolished. A large proportion of businesses prefer a simpler, lower tax burden to one with higher rates offset by more generous exemptions and allowances. A survey by the Forum of Private Business showed that tax allowances designed to encourage investment in companies did not appeal to smaller businesses. The general concern about the take-up rate for the changes to the allowances and the effects that they will have led the Treasury Committee to recommend in its report on the Budget that"““prior to the 2009 Budget, the Treasury review the impact of these measures on business investment in order to ensure that the measures are having a positive impact on investment and business growth, including the impact on small businesses that do not qualify for R and D tax credit or the Annual Investment Allowance.””" Clearly, there is widespread concern about whether the allowances will be taken up. If they are not, small companies will be hit by the increase in the small companies rate of corporation tax. It is worth considering the impact on small companies of the increase in the small companies rate of corporate taxation. The Red Book estimates that the cost to small businesses in the 2007-08 tax year will be about £10 million; that in 2008-09 it will be £370 million; and that in 2009-10 it will be £820 million. That is a £1.2 billion tax take from small companies. How will that impact on the individual companies that are subject to the regime? The Financial Secretary said last week on Second Reading that there were about 4.3 million small businesses in this country, that approximately three quarters of those were self-employed and therefore not affected by the increase in corporation tax in the Budget and that, of those that remained, a further quarter did not pay corporation tax because they had no declarable corporation tax profits. That means that approximately 800,000 businesses will be affected. In the 2009-10 tax year, they will pay £820 million. That implies an average increase in corporation tax to those businesses of £1,000 per business.