A few years ago there was a %0 corporation tax band so that the first few thousand pounds of a company's profits were tax free. This was a great help to small businesses as it allowed them to accumulate some capital. Not now of course. Now every penny of a company's "profit" is taxed - even if that profit stays in the company. This is a disincentive for small businesses to build up capital and so for anything above normal operating costs you are virtually obliged to go cap in hand to the bank to "borrow", the interest on your borrowings then being allowable against your tax. This culture of relying on borrowing to grow a business has led to the absurd situation where banks borrow off each other, and we've all seen how that can go pear shaped.This all seems wrong to me, businesses growth would be encouraged if companies were allowed to retain more of their profits tax free to build up capital for future investment, or to see them through hard times. Instead there is a pressure to spend money as you earn it (to reduce any taxable profits) to avoid losing it to the tax man. Now tax payers money is being pumped into banks to encourage them to lend back to us to keep us in business. I've got a better idea. Instead of taking money off small businesses to give to banks to lend back to us let small businesses keep more of it to invest in ways that will genuinely help the economy, it may mean less revenue for the banks, but I won't be losing any sleep over that.

Disclaimer: I am not an accountant, get professional tax advice!

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