The government has dramatically scrapped its plans to introduce a new tax on the dividends of small businesses.
The chancellor Gordon Brown has been under immense pressure from business lobby groups since announcing the tax in last month’s Budget, and last night confirmed it wouldn’t be introduced today as originally planned.
Speaking at a specially arranged Whitehall press conference, Brown conceded that to hit businesses with another new tax so soon after last year’s National Insurance rise had “perhaps been unfair”.
Brown also confirmed: “We’ve realised that to tax small businesses on dividends would only place another barrier in front of small business owners who are the fabric of the UK economy.
“Instead, we’ll offer tax breaks to sole traders to stem the flow of people incorporating for the sake of benefiting from zero corporation tax..
“This way, both sole traders and small businesses will have the tax incentive to grow and prosper, benefiting the UK economy and labour market in the long term.
“Today’s announcement confirms the government’s commitment to building a stable economy built on enterprise,” he said.
The government had originally said the dividends tax would “close a loophole” that had been exploited by small businesses owners that were only interested in pocketing profits and not expanding.
Speaking to The Times last week, small business minister Nigel Griffiths said:
“Small businesses told the chancellor and they told me that if we gave them a tax break they would use that money to invest in their businesses. Sadly, they decided to take it out in income by switching it to dividends and putting it in their back pockets.”
Patricia Hewitt, the secretary for state of trade and industry, had also described the situation as “unfair” on taxpayers and rejected claims that the government had created the loophole by setting corporation tax at zero. Hewitt had also denied the government was confusing small business owners by changing the tax system less than two years after its last shake-up.
However, speaking at last night's press conference, Hewitt and Griffiths jointly apologised for their comments and admitted that the number of small business owners actually pocketing their profits was minimal.
Hewitt said: “It was never our intention to suggest all small business owners are living a life of luxury at the expense of the taxpayer. We realise the vast majority of them are hardworking, committed individuals determined to make their businesses succeed and grow.
“By making today’s policy u-turn, we acknowledge that the existing tax system works for the well being of the majority of small businesses and that’s why we’re extending similar benefits to sole traders.”
Griffiths added: “The government is as committed as it has ever been to making the UK the best place in the world to start a small business.”
Reported by Matt Thomas
Unfortunately, if you hadn’t guessed it already, this story is an April Fool’s joke. As far as we know, the government has no intention of abandoning the new dividends tax. Sorry.
The comments, actions and opinions attributed to Gordon Brown, Patricia Hewitt and Nigel Griffiths (except those taken from The Times – he did actually say that) are purely fictional and completely made up by Startups.co.uk for your satirical satisfaction only…more’s the pity.
