The controversial rise in the small firms’ rate of corporation tax will place increasing strain on the cashflow of small businesses and could have a lasting detrimental impact, it has been claimed.
According to online credit checking firm e-bcm, the gradual rise in corporation tax being levied on small firms over the next three years is likely to exacerbate problems with late payments and bad debts in the sector.
In his recent Budget statement, chancellor Gordon Brown announced that the tax rate for small firms would be raised from 19% to 22% over the next three years
Brown explained that the rise in the rate of corporation tax on small businesses was intended to reduce the tax difference between those who are self-employed and small companies.
However, credit checkers at e-bcm have argued that the rise will only serve to put more small firms in jeopardy.
“We don’t believe this is a smart move, either for small businesses or the economy as a whole,” said commercial director of the company, Dennis Scott.
“This move will increase the tax burden on small firms at a time when they are under increasing financial pressure due to late payments, rising regulatory burdens and higher rates of borrowing.”
“We believe it could see many small firms sailing much closer to the wind or even going out of business completely, which could have a serious knock-on effect for the economy as it will make small businesses more cautious and restrict their spending power.”
E-bcm also argued that the tax hike will put more financial pressure on firms and make it more difficult to keep up payments to suppliers.
“The increased tax burden will have an impact on cashflow for these businesses so it’s going to put more pressure on payments and make it harder for businesses to pay on time,” Scott added.
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