The rules of distraction

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The Independent Online

The most frequent complaint made by owner-managers of small and medium-sized businesses is that they are burdened by too much regulation. Rules about employment, health and safety, waste disposal and tax - to name a few - are now so plentiful and often so complex that entrepreneurs sometimes feel that dealing with them can take up as much time as developing their businesses.

The Government has made much of its commitment to small business, but - despite the presence of the Small Business Service and taskforces dedicated to investigation regulation - has done little to improve the situation. Indeed, last month's (21 March) Budget is regarded as typical in that, in announcing a range of measures that roughly balance each other out in terms of the amount of tax received, the Chancellor, Gordon Brown, has added to the complexity of the tax regime.

Carol Undy, chairman of the Federation of Small Businesses, says that the Chancellor "gives with one hand and takes with another". It is a familiar refrain, given support this year by Brown's decision to reduce the rate of corporation tax by 2 per cent to 28 per cent while raising the tax on small businesses by the same amount, to 22 per cent. As in the past, the Budget contained proposals for adjusting capital allowances and tax reliefs on different activities.

LexisNexis, the leading provider of information for tax experts, says that the size of its Tolley's Yellow Tax Handbook has grown by approximately 70 per cent since the 2001 General Election. Then, the handbook of UK direct tax legislation contained 5,952 pages over two volumes. By last year, the book ran to four volumes containing 9,806 pages. This year's Budget is expected to add at least a further 400 pages.

LexisNexis's Mike Truman says that "the Chancellor has persisted with adding complexity that is likely to puzzle and frustrate many businesses. This year's continued growth in tax legislation gives real credence to fears that British competitiveness is being damaged by a complex and lengthy tax code."

However, it is not just tax that is causing concern. Increasingly wide-ranging health and safety rules mean that proprietors have to add to their costs by introducing measures aimed at preventing accidents or other incidents, even if they are not likely in their businesses.

Similarly, the rules associated with employing staff have become so complex and the ramifications of getting it wrong so serious that many businesses say they are put off taking on extra people.

Such concerns have fuelled interest in services designed to keep busy owner-managers who do not have the same sort of professional support enjoyed by large companies up-to-date.

Experts advise companies to ensure that they have policies and procedures in place regarding employment and health and safety, that they try to keep abreast of legal requirements and register with the correct authorities. Perhaps most importantly, they need to ensure that they have adequate insurance.

Small business groups do not wish to give the idea that they are encouraging members to ride roughshod over their employees' rights or to have a lax approach towards safety. But they do point out that such regulations, combined with the tax rules, are hardly evidence of the sort of enterprise culture that successive governments have said they are trying to encourage. As Nick Goulding of the Forum of Private Business, says of last month's Budget: "The changes made for smaller firms will serve only to further burden them."

On 20 April, we'll be discussing issues relating to production and outsourcing