Fairness for Small Business Owners

The Government, and in particular the Chancellor, has responded with a huge package of financial support for businesses during the pandemic. That is with the notable exception of the small business community.

Heroes of the UK economy, entrepreneurs put their capital and assets generally on the line to achieve success. In doing so they create satisfying jobs for many people and play an important role in innovation and create low cost supply lines for larger companies. 

Many of the owners of these companies accept the risks and set up businesses which employ a small number of employees and the owner, perhaps with their spouse/partner, own all of the shares in the company. Many, with professional advice, take only a small salary from the company and if the company makes sufficient profit will pay themselves a dividend. Often this is a practical necessity if their income is lumpy with income received on an irregular basis. In these circumstances taking a regular salary could cause problems. 

The problem is that the government has disallowed those receiving their main income from dividends from receiving anything. How can this be right? It should be remembered that if the company has made profits sufficient to pay dividends this will be after tax has been paid on company profits. When the dividends are paid the owners would then pay additional income tax.

So just like an employee, the owner pays tax through his company and then income tax on top. Despite this, under the government’s plans, the small business owner will receive nothing if the dividend payment is the main income source. Likewise, if the small business owner earns more than £50,000 they will not receive a penny of support. Why? Since a salaried employee will receive the capped amount of £2,500 each month irrespective of how much they earn. There appears to be no upper limit to the amount an employee earns but there is for the small business owner. Where’s the fairness in that? 

This policy is not only grossly unfair but is also remarkably short sighted since there is every prospect in this scenario of the company collapsing with the loss of jobs and damaging larger companies supply lines, creating additional recessionary forces in the economy. 

The government has been generous in its decisions to help business and the time has come to give help to this important sector of our business community.