Partner Article

Zero Tax And NI For Start Up Businesses?

With the downgrading of Britain’s triple A credit rating on Friday by Moody’s, there will be more pressure than ever on the Chancellor to find innovative way to get the economy moving.

The chancellor, George Osborne, has just 23 days until his next budget. With the general election just two years away, it could be argued that this is his last chance to turn things around.

There are a number of ideas to try to regain growth, many of them require borrowing more money. For example, a cut in VAT by 2.5% may stimulate growth, but will cost the treasury around £12billion in the 2013/14 financial year. It is unclear whether the additional consumer spending would raise more in tax than the £12billion it costs. Even if it does, the effects on growth are unlikely to be substantial.

One suggestion, recently made by George Freeman MP, is to release an ‘entrepreneurial insurgency’ by incentivising people to set up their own business.

This would be achieved through a policy called the ‘New Deal for Business’. This policy would ensure that in the first two years of a business’ life there would be no corporation tax, no NI, no VAT and no big company regulations.

As a small business owner myself, I know how hard the few years can be. If we’d had a tax holiday for the first two years, we could have invested the money into extra marketing and business development. We also found that becoming ISO 9001 certifiedhelped establish ourselves as a company and build credibility. Our tax bill in the first year was £12,000. ISO 9001 certifications start from £799 + VAT, so the money which would have gone to tax would have easily covered it and a significant investment in marketing. This would have almost certainly increased the speed in which our company grew – allowing us to create more jobs.

Clearly there will be a cost to this tax cut. However, if it encourages people to start up companies who may not have done so without it, and helps new business established themselves and compete, the New Deal for Business, might be just what the Chancellor needs.

This was posted in Bdaily's Members' News section by Fountain Partnership .