Small businesses around the United Kingdom are fearful today that a tax increase, created by Gordon Brown when he was Chancellor of the Exchequer, will contribute towards the demise of thousands of small firms in the wake of the economic downturn.

Alistair Darling is planning on increasing the corporation tax on small business profits by one per cent from next year.  This decision will be coming after a Governmental decision to remove the 10p rate of income tax, which attacked some of Britain’s poorest workers.

The shadow Treasury minister, Justine Greening, who was openly opposed to the increased road tax planned by the Government, has requested Alistair Darling to turn away from the proposed increase in tax and said, “This tax is the difference between some companies continuing in business or going under.”

A Parliamentary action calling on the Government to abandon the proposed corporation tax increase has been signed by eighteen MPs, including Labour backbenchers.  The increase from 21 per cent to 22 per cent would be a hard to swallow pill for small businesses as they have already recently seen an increase from 19 per cent since 2006.  Figures recently revealed show that the Government has raised tax by over £2.5 billion for small businesses since 2006, and the proposed increase would add a further £240 million.

Justine Greening went on to say, “Gordon Brown may lecture the banks on helping small companies but he needs to look closer to home at his own government, which is bleeding Britain’s smallest companies dry. This is a repeat of the 10p tax scandal for small companies.”

Prior to 2006, small businesses making less than £10,000 did not have to pay corporation tax, however, post 2006 saw this law change, causing devastating effects for thousands of small firms throughout Britain.

The director-general of the BCC (British Chamber of Commerce), David Frost, ha said, “If we are going to get through this downturn, the Government has got a role to play. Stopping this increase would send a clear message that the Government understands the severity of the problems we face.”

The Conservatives have calculated that more than half a millions small businesses have witnessed sharp rises in the tax they are being made to pay due to so called “stealth” increases in business tax since 2006.  Having paid no corporation tax between 2005 and 2006, a quarter of a million of the smallest businesses will have to watch their tax rates rise to an average of £946 yearly.

Stephen Alambritis from the Federation of Small Business said: “We are astounded that the Government decided to increase tax on small business and we would urge ministers to cancel the increase. These firms employ millions of people yet the Government is apparently not prepared to help. If small businesses can hold their ground, the recession is more likely to be shorter and shallower.”

Gordon Brown has announced that he will be prepared to consider an array of tax cuts and information will be available next week in the pre-budget report.

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