Traders' fury as tax man takes cut of tram payout

Published on Friday 4 March 2011 14:18

TRAM bosses have been criticised for an "ill-conceived" compensation scheme aimed at small businesses after it emerged many of the firms have been forced to hand much of the money to the tax man.

More than 400 traders claimed support payments of up to 4000 each in 2008 under a scheme co-ordinated by Edinburgh Chamber of Commerce and tram firm TIE to compensate for the disruption caused by the project.

But it has now emerged that many of those firms have had to pay up to 40 per cent in tax on the grants after confusion about how to account for the cash.

Edinburgh Chamber of Commerce had urged Her Majesty's Revenue and Customs to show leniency, criticising it for showing a "predatory instinct towards businesses under very difficult circumstances".

But the businesses themselves have criticised TIE and the Chamber for their handling of the scheme, claiming not enough guidance was given on how to declare the money.

Marshall Bain, owner of the Queen Charlotte Rooms function suite, and Mary Moriarty, the former landlady of the Port O' Leith, who featured on a poster campaign funded by TIE, are among those who have been forced to hand over money to HMRC.

Mr Bain, who paid 1600 in tax on the 4000 he received, said: "The tax man has either taken 22 per cent or 40 per cent, depending on the business.

"TIE have kept this very quiet, but they were telling everyone when they were giving the money out.

"People thought it was compensation and didn't put it through the books. TIE just arrived at my door one day with a cheque for 4000, somebody just dropped it in - that was it.

"It's just another chapter in the tram saga. They've made such a mess out of the whole thing."

A total of 427 businesses claimed the business support payments, with nearly three-quarters of the money going to traders on Leith Walk - a total of 1.1 million.

West End businesses claimed 384,000, while those in the city centre took a total of 47,000 as part of the Open for Business initiative.

Alan Rudland, chairman of the Leith Business Association, said: "This whole scheme seems to have been ill-conceived.

"The level of compensation amounted to around 2.70 a day if the tram line had been finished by 2011. I hate to think how little that sum equates to now. It would barely buy you a sandwich."

Lothians MSP Shirley-Anne Sommerville, an outspoken critic of the trams, added: "The fact that many of these businesses are now losing much of the money they were given shows this is yet another example of TIE being more spin than substance."

TIE said it had never suggested the money had been tax-free and said it had been up to individual businesses to seek advice from their accountants.

Mandy Haeburn-Little, director of communications at the tram project, said: "Whilst taxation is solely a matter between HMRC and the individual businesses, we would hope that it is recognised that the Business Support Scheme was aimed at assisting businesses."

HMRC declined to comment.