Finance Bill

The tax system will work only when the rules are perceived to be fair. People who abuse the small companies rate by moving from unincorporated to incorporated status purely to pay less income tax and avoid paying national insurance contributions are engaging in precisely the kind of tax-induced activity that does not promote a stronger economy or flourishing enterprise. It is completely unfair if some people can lower their tax bill by moving from unincorporated to incorporated status, while Joe Bloggs, who has to pay his tax through PAYE, does not have that opportunity. That is the essential point at issue in this tax change. The Chancellor of the Exchequer made it clear in his Budget speech in March that he was introducing the change"““to deal with individuals artificially incorporating as small companies to avoid paying their due share of tax.””—[Official Report, 21 March 2007; Vol. 458, c. 815.]" The clause raises the small companies rate from 19 to 20 per cent. this month, with further increases to 21 and 22 per cent.—