Over the past weeks, business organisations have been submitting their recommendations to the Chancellor ahead of the pre-Budget Report.
Here is a brief summary of the measures some of the business community would like to see Mr Darling announce.
The Forum of Private Business
The Forum of Private Business (FPB) said that the prospects for sustained economic recovery could be jeopardised unless small businesses can survive and grow.
The FPB wants a reversal of plans to raise small firms’ corporation tax, to be replaced with a cut to 20 per cent.
There should also be a year-long reduction in national insurance contributions for businesses with fewer than 10 employees that take on new staff. The 0.5 per cent increase in employers’ NICs, penciled in for April 2011, should be delayed.
Given the approval for reductions in VAT rates granted by the European Commission in May, the FPB called on the government to investigate VAT cuts for some business sectors. Reducing VAT to 5 per cent for labour-intensive services, including hairdressing and home renovation and repair, would stimulate demand.
The date set for the reversion to the old standard rate of VAT – 31 December – should be put back for a reasonable period of time to help small businesses cope.
Smaller firms should be enrolled automatically for the business rate relief to which they are entitled rather than having to apply for it.
On the issue of business regulation, the FPB is seeking a moratorium for new legislation until the next general election, allowing time for the introduction of a first comprehensive regulatory review, along the lines of the comprehensive spending review, which would examine the administrative impact on smaller firms.
The government, the FPB concluded, should continue to offer business support. With a reduction in government expenditure almost inevitable as a result of the poor state of the public finances, the FPB called on ministers not to sacrifice the funds that are earmarked for helping businesses.
The FPB expressed worries that the Enterprise Finance Guarantee (EFG) and Trade Credit Insurance (TCI) top-up scheme could suffer cuts in funding. Instead, the FPB wants plans put in place to replace the EFG, which is set to run its course by March next year.
In its pre-Budget Report submission, the CBI argued that a series of short-term tax and regulatory measures could ease the pressure on firms and encourage business investment.
The CBI backed the case for maintaining and improving the research and development tax credit scheme in order to promote innovation.
The employers’ group also wants to see the costs of raising equity made tax deductible for SMEs and the tax treatment of debt and equity equalised to help cash-strapped small firms.
Planned changes to the pension tax relief system for higher earners should be reconsidered by the Chancellor, the CBI went on to say, as they will weaken incentives to save.
Extending the Pension Regulator’s ten year trigger and de-regulating small mergers would likewise help, while the government should rethink a number of planned business tax increases, as in the cases of National Insurance contributions, landfill tax, air passenger duty and the timing of the VAT rise.
The Chancellor should use the pre-Budget Report to provide firms with the sort of financial environment necessary for progressive investment, the EEF said.
The manufacturers’ group also urged Mr Darling to take steps to correct the deficit in public borrowing, although not at the expense of higher tax burdens for business.
Specifically, the EEF wants the 40 per cent first year capital allowance extended for a further 12 months to April 2011.
A freeze needs to be imposed on the small companies’ rate of corporation tax, again until April 2011.
The rules governing R&D tax credits must, the EEF continued, properly reflect the aims of the scheme, while a temporary extension should be made to the R&D tax credits payable to larger businesses involved in low-carbon projects.
Plans for the future funding of training and skills programmes should be made clearer.
Additionally, given the squeeze on credit now affecting many businesses, the EEF asked for the creation of a bank for industry, which would be able to provide firms with a simple, easily accessible source of growth finance.
The Professional Contractors Group
The Professional Contractors Group (PCG) said that the IR35 system should be removed.
The PCG also proposed abandoning plans to introduce legislation on income shifting designed to prevent ‘husband and wife’ businesses from gaining a tax advantage by sharing their income via dividends.
Federation of Small Businesses
The Federation of Small Businesses (FSB) warned the Chancellor that imposing additional taxes on smaller businesses could cost many thousands of jobs.
As a result, the FSB called on Alistair Darling to keep employers’ NICs on hold, so giving SMEs the chance to create additional jobs.
This, the FSB said, would represent a vital step towards making it easier for the UK’s 4.8 million small businesses to employ staff and to drive the economy out of recession.
A reduction in corporation tax would also add to the incentives for taking on more employees.