The British Chamber of Commerce claims that the UK Budget for 2007/08 will cost small business £1.2 billion ($2.35bn) over the next two years.

A poll showed that 71 percent of British businesses would be worse off after tax rises announced by Chancellor Gordon Brown in Parliament yesterday.

The UK’s 4 million small businesses currently pay corporation tax of 19 percent on profits up to £300,000 ($588,000). But Brown announced he will raise this by one percent each year to 22 percent by 2009.

Simultaneously, corporation tax on big companies will be cut from 30 percent to 28 percent, leaving smaller businesses gasping at the unfairness of it all.

Some attempt has been made to offset this move by allowances and credits on research and development and major business investment.

Nick Goulding of the Forum of Private Business said : “The vast majority of small businesses are not going to carry out R&D or buy new machinery every year. This is the type of one-off investment that they make at the start or every ten years”.

The move seems aimed at retaining larger companies in Britain by adjusting British tax levels to those in competitor countries, and making smaller businesses, which can’t leave these islands, pay for it.