smallbusiness.co.uk: Helping your business think big

Britain is no longer internationally competitive and needs a 'radical overhaul' of its tax system in order to regain its edge, according to a new report.

The Confederation of British Industry's (CBI's) report, UK business tax: a compelling case for change, says that the UK tax system is failing both small and global business.

As well as discouraging global business from setting up in Britain, the system needs to be 'simplified and improved' in order to stimulate the growth of small and medium-sized enterprises (SMEs), the CBI says.

It is calling for an exemption for SMEs from rules intended to cover multinationals and asking the government to bring a small firms corporation tax of 18 per cent.

Director general of the CBI, Richard Lambert, says the business tax system was no longer 'fit for purpose'.

The convoluted nature of the tax system makes it difficult for businesses to plan ahead and pay the right amount of tax, he says.

'The UK government should clear away the thick layer of silt that has built up over time in our tax system,' he adds.

The CBI is a business organisation that represents around 240,000 businesses, which employ around a third of the UK private sector workforce.

Changes due to come into force with the new budget on 6 April have caused controversy among small businesses. There will be new rules on capital gains tax and splitting up declared income, among other new regulations.