Pre-Budget report: We need action now - not more talk

Nov 19 2008 by Alistair Houghton, Liverpool Daily Post

“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@dailypost.co.uk

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