Petition launched against proposed Dividend Tax

Small business owners have launched another online petition against government proposals to stop them being paid via dividends to reduce their tax bills.

The petition claims the new Dividend Tax “flies in the face of risk and reward for running a business and contributing to the economy”.

At the time of writing, the petition has secured more than 45,000 signatures, with 100,000 required in order for the issue to be considered for debate in Parliament.

The Government has stated that business is going to be at the core of their economic programme throughout the next five years, but the petition states there is a “real danger that this new tax, along with auto enrolment and minimum wages increases, will have a significant effect on those people brave enough to start up a business that could make a meaningful contribution to the economy and jobs market”.

Small firms make up 99.3 per cent of all private sector businesses in the UK, creating almost half of all private sector jobs.

HM Treasury has responded quickly to the petition and suggests that Dividend Tax reform “allows [for] further cuts in Corporation Tax and reduces the incentives for tax motivated incorporations”.

“The Government is fully committed to supporting business and entrepreneurship. As set out at the Summer Budget 2015, the Government believes that one of the best ways to support growth and enterprise in the UK is through lower and more competitive Corporation Tax rates,” added HM Treasury.

“It is not possible to continue to reduce the Corporation Tax rate without looking at the overall balance of the tax system, including taxation of dividends.

“Lowering the Corporation Tax rate without action elsewhere increases incentives for individuals to set up a company and pay themselves through dividends to reduce their tax bill (also known as tax motivated incorporation).

“Therefore the Government is reforming dividend taxation. These reforms, which will also simplify the dividend tax system, will significantly reduce the incentives for people to set up a company and pay themselves through dividends rather than wages simply to reduce their tax bill.

“Taxpayers and the Exchequer will now be £500 million better off as a result of reduced incentives for tax motivated incorporation. Those who choose to work through a company continue to pay lower rates of tax than the employed or self-employed.

“But the reforms move the overall tax rates for the self-employed and those incorporated closer together, making the system fairer overall.”

The petition, created by small business owner, Frauke Golding, has just over four weeks left to run, with the aim of achieving another 55,000 signatures to make this a topic for parliamentary discussion.

Date published 27 Jan 2016 | Last updated 27 Jan 2016