Alistair Houghton finds out what the region’s businesses and professional advisers want to see in next week’s pre-Budget report

SEVENTEENTH-CENTURY French finance minister Jean-Baptiste Colbert once said: “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.”

But, at a time of economic downturn, there are fewer feathers and the hissing of the goose has grown much louder.

All businesses have been hit by the shockwaves from the credit crunch, from housebuilders struggling to find buyers for their properties to retailers coping with a slump in customer numbers and companies struggling to get funding from their banks.

Next week, Chancellor Alistair Darling will unveil his pre-Budget report, in which he will reveal measures to help kick-start the economy.

Today, the call from Merseyside firms is loud and clear – they want tax cuts, and they want them now.

The Cheshire-based Forum of Private Business is calling for tax cuts, a reduction in red tape and better bank lending to help small firms ride out the downturn.

The Government is planning to increase the corporation tax rate for smaller firms from 21% to 22% in April. The FPB instead wants that rate cut to 20%.

The organisation wants the Government to keep its commitment to monitor the way banks lend to small firms and ensure that companies can still access the funding they need to survive.

The FPB also wants Small Business Rate Relief (SBRR) to be applied automatically. It says £200m of SBRR goes unclaimed each year because many firms are unaware of it.

FPB member Tim Rhodes, managing director of Skypark Freight, in Liverpool, said: “The Government could do more to promote the scheme – it’s interesting how, when they want money off you, they make it clear what you need to do. But, when the boot is on the other foot, it's impossible to get hold of them.”

The Federation of Small Businesses is also calling for the planned small firms’ Corporation Tax rise, proposed in the last Budget, to be abandoned to give its 215,000 member firms a short-term boost.

It also wants the Chancellor to create a new £1bn Small Business Survival Fund to lend to companies struggling to get loans from increasingly tight-fisted banks.

FSB Liverpool branch chairman Chris Burgess said: “The UK’s 4.7m small businesses need more than talk – we need action. Alongside new funds made available in new ways, we also need to see the Government act immediately to reduce the burden of small companies’ taxation.”

The Engineering Employers’ Federation (EEF) says it expects to see “radical and innovative” tax cuts from the Government.

EEF spokesman Andrew Semple said: “The Bank of England has taken a bold step in recent weeks with their interest rate cuts – our members feel the bank has now passed the baton on to the Government to carry on with radical and innovative policy.

“We are in unprecedented economic times, and I know business expects a real boost from the pre-Budget report which now has taken on a much increased significance.

“Manufacturers will be looking for a hold on further taxation planned for the medium term – particularly in areas like the aggregate tax, the land fill and climate change levy. In fact, any tax increase will simply generate job losses.”

THE Institute of Directors (IoD) wants a “temporary £20bn fiscal stimulus” through a 3p cut in the basic rate of income tax and a 4p cut in the main rate of corporation tax.

IoD regional director Darrell Matthews said: “While the IoD continues to advocate a significant medium to long-term reduction in the size of the state, we also recognise that extraordinary times call for extraordinary measures.”

Matt Newing, managing director of St Helens-based Elite Telecom, said Corporation Tax rates needed to be addressed immediately.

He added: “At present, the rates are simply oppressive and its small wonder that so many firms look to move offshore in a bid to avoid these high levies.

“Entrepreneurs are strangled in their ambitions by being forced to pay disproportionate taxes that could otherwise be re-invested in creating employment and growing their businesses with much greater speed.”

David Cadwallader, head of corporate law at solicitors DLA Piper, in Liverpool, said: “Whatever measures the Chancellor takes, they need to be introduced quickly. Decisive action is required. I think it’s simply about putting money in people’s pockets.

“One measure would be to reduce VAT to 12.5% on essential items – and do it before Christmas.”

Peter Lawson, business development manager at Wirral-based drainage engineering firm Auger, said: “Suggestions that the chancellor will announce a 5% cut to VAT are certainly good news for the business sector, both regionally and nationally.

“We are in the process of expanding our network to cover every part of the UK, and would therefore welcome moves to make business easier as our client roster increases.”

Even if the Government decides not to cut taxes, there is widespread agreement that it could adopt a more flexible approach to tax collection to give businesses some breathing space.

The FPB, for example, wants more firms to be able to benefit from the Cash Accounting Scheme, which allows businesses to pay VAT when they have been paid, rather than on unpaid invoices. That, it says, would help businesses struggling to collect late payments.

Martin Dawson, a tax partner at the Liverpool office of Grant Thornton, agrees that kind of flexibility is essential.

He said: “New measures to help small businesses might include extending the VAT payment deadlines for SMEs and increasing accessibility to the VAT cash accounting scheme.

“The Government could also look to change the VAT Bad Debt Relief rules and reduce the current six- month limit and make the claims immediate if the customer has become insolvent.”

BRIAN CLARK, tax partner at PricewaterhouseCoopers, in Liverpool, said: “With tax bills from a better year needing to be paid when things are a bit tighter, cash flow assistance for hard-pressed businesses would be a welcome move.

“The Chancellor could suspend HM Revenue & Custom’s debt enforcement procedures for some businesses. A deferral of due dates for income tax, Corporation Tax, pay-as-you-earn and National Insurance contributions would also help put liquidity back into the part of the economy that needs it most.

“A measure that would allow business to establish sooner with HMRC that it is making a loss, leading to reduced tax payments and quicker tax refunds, would also be a welcome move.

Accountants are also urging the Government to clarify its plans to change other taxes so businesses can be clear about what bills they may face in the future.

Sean Beech, office head and tax partner at Deloitte in Liverpool, said the Government needed to make clear how it planned to tax firms on their overseas earnings to avoid more firms being tempted to move their head offices out of the UK.

One cautionary note was sounded by Carl Cross, a senior investment director at fund management firm Rensburg Sheppards, in Liverpool.

He said: “The rapid deterioration in the economic position over the last few months has left the Chancellor with very little room for manoeuvre. Recession will inevitably see a reduction in tax revenues and an increase in unemployment benefit costs.

“The Government will want to try to limit the length and depth of the recession by increasing spending and/or cutting taxes. It is perfectly credible, but happening just when the cupboard is already bare.”

alistairhoughton