HC Deb 11 December 2003 vol 415 cc1175-6
1. Mr. Mark Prisk (Hertford and Stortford) (Con)

What representations she has received from small businesses about the effect of changes in the taxation of husband and wife enterprises. [143317]

The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)

There have been no changes in the taxation of husband and wife enterprises.

Mr. Prisk

I think that the Minister is misinformed because the tax changes that small businesses have told me about mean that no one in a family firm now knows what their tax liability is, for this year or for the past six years. I refer, if the Minister is uncertain, to section 660A. This is creating uncertainty for hundreds of thousands of family firms. Will the Minister therefore agree to meet a delegation of small businesses to hear them express their concerns?

Nigel Griffiths

The hon. Gentleman refers to section 660A, but he is being a bit economical in his description. It is section 660A of the 1988 measure to counter tax avoidance. The treatment of businesses under that has been consistent. I understand that the maximum that a husband and wife can attempt to avoid is about £8,000. However, at the moment the Inland Revenue is dealing with fewer than 100 inquiries on this subject. As I meet small business representatives regularly, if they raise the matter with me they can be sure of a robust response.

David Taylor (North-West Leicestershire) (Lab/Coop)

The business sector clearly welcomes the generally benign and encouraging regimes that the Chancellor has introduced since 1997 and there have been great incentives to small businesses to incorporate, but does the Minister agree with the Federation of Small Businesses that an imbalance has grown up between incorporated businesses and the self-employed and partnerships, including husband and wife partnerships, to the extent that the future of some of those self employed and partnership businesses is imperilled? Should not taxation exist to produce revenue, not to shape the form in which business takes place?

Nigel Griffiths

I greatly respect the Federation of Small Businesses and the campaign that it launched with its members some time ago, but I think that small businesses also appreciate that there are advantages to not being incorporated, as well as to incorporation. Whereas incorporation now allows them to benefit from, I think. the lowest starting rate of corporation tax in the advanced industrial economies and a level of corporation tax among the lowest anywhere, unincorporation does confer advantages on small firms and many choose to retain that status, which is why 100,000 viable small firms have started up in the last six years and continue to trade and prosper.

Mr. Jonathan Djanogly (Huntingdon) (Con)

If a company pays dividends to its shareholders, why should it matter that they happen to be married? Is not this interpretation an attack on family businesses in this country?

Nigel Griffiths

The hon. Gentleman should address that question to Lord Lawson who, as Chancellor in 1988, was responsible for this piece of legislation. As I have said, I am informed that there have been fewer than 100 inquiries to the Inland Revenue on this subject. Such conduct may involve, in many cases, trying to ensure that a sleeping partner —a non-active—director can benefit from tax avoidance, which is why Nigel Lawson closed that loophole.