The Institute of Chartered Accountants of England and Wales has used its
Budget submission to the Treasury today to call on the Chancellor to think
carefully before launching any new initiatives.
Michael Izza, the institute’s chief executive, said: “Whatever Alistair
Darling announces in the Budget, it could be a huge distraction for business
when they need to concentrate on getting through this tough time. Too many
times in the past we have seen changes brought in with disregard for the
impact they have on UK companies and their competitiveness globally.”
Businesses have been hit by unexpected tax changes as the Government has
sought to respond to the recession, from the temporary VAT cut to the
last-minute decision to reduce this year’s annual increase in business
rates. There are also tax changes planned, from additional corporation tax
for smaller companies to employers’ national insurance contributions. “VAT
may also rise back beyond the 17.5pc as well,” said Ms Lagerberg.
Business lobby groups expect the Government to announce some action on access
to finance and in dealing with the withdrawal of credit insurance cover. It
may also decide to automatically enrol all qualifying businesses in England
into its small business rate relief scheme.
This reduces the rates bills due on premises with a rateable value of between
£5,000 and £15,000, but is under-used, with more than £200m in relief
unclaimed each year.
The CBI has called on the Chancellor to rethink his plan to increase
employers’ national insurance contributions to by 0.5 percentage points to
13.3pc in 2011, arguing that the tax-raising measure, designed in part to
recoup the cost of the temporary VAT cut, would hit job creation at a time
when unemployment will still be “very high”.
Russel Griggs, chairman of its Small and Medium Enterprise Council, said the
Chancellor should address the imbalance in the way the tax system favours
debt finance, the cost of which can be treated as a business expense, over
the costs associated with raising equity finance, which cannot. “I think
there should be a level playing field.” .
But Mr Griggs said the Chancellor’s main objective should be to deliver a
Budget that helped restore business confidence, which he said remained weak.
He pointed to the decline in business demand for bank credit as a sign that
investment decisions remained on hold and few companies were looking to
expand. “You cannot under-estimate the damage that a drop in confidence will
have on the economy,” he said.
This sentiment was echoed by Phil Orford, chief executive of the Forum of
Private Business. “Rebuilding confidence is key to ensuring that small
businesses are able to survive and, ultimately, as the economy recovers,
begin to grow,” he said. “That means workable policies creating the right
conditions for both small businesses and consumers.”
The forum has called for a range of measures, including the scrapping of
April’s 2p fuel duty rise and planned rises due in 2010; for a freeze in the
minimum wage and one percentage point cut in smaller company corporation tax
The Federation of Small Businesses has lobbied the Chancellor to take
“decisive action” to address the impact of the recession and the credit
crunch on small businesses.
It has suggested a substantial increase in the personal income and national
insurance tax thresholds to £10,000 to lift those on low incomes, including
the self-employed, out of paying tax entirely.
To tackle the ongoing concern that banks are denying viable businesses access
to the credit that they need to survive the recession, the FSB has also
called for mediators to sit between banks and small businesses to help
decide whether the business is viable. One senior bank source indicated that
this idea would be resisted, suggesting the idea may not get off the drawing
Grant Thornton’s Ms Lagerberg said she expected the Chancellor to make “lots
of positive noises” about the take-up of HM Revenue & Customs’
time to pay service, launched at the pre-Budget last autumn, and also to
emphasise the availability of the £50,000 annual investment allowance, which
is in its second year. The allowance lets any business write off up to
£50,000 of qualifying expenditure against its taxable profits.
HMRC said that as of April 5 it had agreed to defer collection of over 106,000
individual business taxes, ranging from corporation tax to VAT, worth over
Accountants speculate that there may also be more tax breaks to encourage
investment in green technology to coincide with the Government’s first Green
Budget, which is released alongside the main Budget.
What the Tories would do to help small businesses:
National Loan Guarantee Scheme: “We would introduce a big, bold
and simple scheme to get credit flowing and save jobs. The Government would
charge a fee to protect the taxpayer.”
Help with cash flow: “We are committed to cutting small company
corporation tax rates from 22p [the planned rate for April 2010] to 20p.
This will help reduce costs and ease cash flow and is fully funded as part
of reforms to corporation tax. We will let companies defer VAT bills for up
to six months at a reasonable rate of interest, injecting more than £10bn
into the economy.”
Make the Small Business Rate Relief automatic: “That means scrapping
the forms and bureaucracy of handling thousands of claims. It would provide
help straight away by cutting the fixed overheads of small businesses every
year. As businesses could be up to £1,100 better off, we have created a
simple online tool. You can check if your business would be eligible by
using the link: www.conservatives.com/smallshops.”
Help retain jobs: “We would cut payroll taxes for employers with fewer
than five employees. A local firm with four employees and a wage bill of
£150,000 would save £100 a month.”
Help small businesses win government contracts: “We want to open up the
£125bn government procurement budget to small and medium-sized businesses.
This would be done by cutting red tape, advertising all contracts worth over
£10,000 online and simplifying the pre-qualification process.”