Chancellor pressured to cut tax in Pre-Budget
Business groups have called for a cut in corporation tax in the upcoming pre–Budget Report (PBR) to help small firms weather tough economic conditions.
The Federation of Small Businesses (FSB) has called for next April’s increase of the small companies’ tax rate from 21% to 22% to be scrapped, but the Institute of Directors (IoD) and the Forum of Private Business (FPB) have gone even further.
The IoD has asked for a four pence reduction in the main rate of corporation tax and a three pence reduction in the basic rate of income tax for 2009–10, while the FPB has called for the small companies’ tax rate to be cut to 20%. IoD director general Miles Templeman said:
“The British economy is facing a unique set of once–in–a–generation challenges. In response to these threats we need to see an aggressive use of both monetary and fiscal policy. The Bank of England has taken action and now 10 and 11 Downing Street must follow.”
The FSB has also asked the Chancellor of the Exchequer to establish a £1–billion survival fund for small businesses. A short–term replacement for the Small Firms Loan Guarantee scheme, the survival fund would be available to small businesses that have been running for any length of time and that have a turnover of less than £5.6 million. FSB national chairman John Wright said:
“The Government must do everything it can to ensure small firms do not need to turn to alternative and expensive sources of finance. A small–business survival fund will provide the urgently needed solution.”
The FPB also proposed that small firms are automatically enrolled in the Small Business Rate Relief Scheme, and argued that more firms should benefit from HM Revenue & Customs (HMRC) Cash Accounting Scheme, which allows businesses to pay VAT after they have been paid, and not on unpaid invoices.
Speculating on the PBR, the Tenon Forum’s head of tax Andrew Jupp said that the Chancellor’s priorities would be to raise revenue without making the recession worse, as well as boosting business and consumer confidence.
“It’s unlikely that we will see a headline cut in the rate of VAT, although it would be easy to extend payment deadlines so that businesses only pay VAT when they themselves have been paid,”
“Small companies have seen the rate of corporation tax they pay increase by 2% over the past couple of years. An immediate reversal of this, and even a cut in rates, would be very welcome” he added.
For more information on current tax rates for businesses, visit the HMRC website