The SME Budget wish list

With this year’s Budget fast approaching, we asked the Forum of Private Business to give us their wish list for what George Osborne might deliver.

March 12 Budget

George Osborne’s third Budget since coming to office is likely to be his most crucial to date. That’s the opinion of the Forum of Private Business which believes the impending Budget which will be commended to the House by the Chancellor on March 21 will need to focus on tax incentives and job creation.

The member lobby group has said the onus will be firmly on Mr Osborne to deliver an economic blueprint with a clear emphasis on business-friendly policies, and able to effectively light the economic touch paper to achieve the necessary fiscal growth across the UK. The not-for-profit employer support group has outlined in its pre-Budget submission a raft of ideas and measures it would like to see implemented by Government in order to ‘Get Britain Trading’ – also the title of the group’s 2012 business support campaign launched last month.

Boosting cash flow

In a Budget submission based largely on that campaign’s central themes, heading the forum’s ‘wish list’ is action from Government to improve cash flow for businesses, something it says has remained a huge barrier for small firms in recent years. While the Government’s National Loan Guarantee Scheme will come in to effect later this spring, the forum is urging the Chancellor to tweak the initiative so as to ensure all loans from £10,000 upwards are included. In its present guise only loans exceeding £20,000 are covered, effectively restricting the scheme to borrowing requirements that are larger than those of the average micro-business. For start-up and low-turnover firms particularly, the Government should looking at further tax breaks for investors wanting to lend through peer-to-peer platforms.

The forum is also supporting a reduction to 0 per cent on the tax on interest outstanding during the lifetime of the loan, providing the loan is still outstanding after three years, and an additional tax relief if a business fails before the loan is repaid.

The perennial problem of late payment also continues unchecked, with the latest data even pointing to a worsening of the situation, according to the forum. It is calling for more help from Government to clamp down on large companies at the top of the supply chain via the introduction of the EU late payment directive to make 30-day payment terms mandatory. It would also ensure against any new legislation preventing suppliers from being coerced into new payment terms against their will.

The Government’s own procurement process could be used more effectively to promote best practice, by avoiding businesses with over 250 employees if they are notoriously bad payers. The risk of losing choice Government contracts would spur firms to clean up their act.

Tax changes

When it comes to tax the forum is continuing to call for a simplified tax system that’s fair and proportionate. Therefore, the forum is proposing the 50p tax rate be abandoned, but says this would need to be countered by rises in PAYE tax thresholds from the £7,470 lower rate. There is growing evidence, it says, to suggest the 50p rate is a barrier to entrepreneurship and inward investment, and is, on balance, outstripping the Government’s tax take. This could also be done in conjunction with a reduction in VAT on home improvements as a way to stimulate growth.

The forum is also supporting calls for a cap on business rates that are due to spike by 5.6 per cent in April. This should be reduced to 2 per cent and held at that level for the duration of the current Parliament. At the proposed 5.6 per cent, the rise would amount to nearly £900 for the average high street convenience store.

On another issue of tax, the forum is asking that the Chancellor either postpones or does away with August’s planned 3p hike in fuel duty altogether. At a time when business costs are spiralling out of control in areas such as energy, another significant leap in fuel duty with diesel and unleaded prices already teetering on the brink of record breaking prices, will strangle economic recovery and further decrease consumer spending.

With so many small firms reliant on fuel to power their businesses, this is an inescapable tax which is the highest in Europe, and puts UK businesses at a massive disadvantage to their EU counterparts.