What might the Pre-Budget Report 2008 bring for small businesses

With Alistair Darling set to make his second Pre-Budget Report to Parliament on 24 November, what might he have in store for small businesses.

The Forum of Private Businesses is calling on the Chancellor to deliver better lending, a reduction in regulation and a series of tax reforms in order to help small firms survive what many fear will be a long and deep recession.

"The FPB wants the Government to stick by its commitment to monitor the banks' lending to small businesses," said Phil Orford, the organisation's Chief Executive.

They are also backing schemes to ease VAT payments for small firms, and arguing for more to be able to benefit from the VAT Cash Accounting Scheme (CAS), which allows businesses to pay VAT when they have been paid, rather than on unpaid invoices.

The FPB's pre-Budget report wish-list is rounded off with a request for the Chancellor to announce;

• a reduction in small companies' rate of corporation tax to 20%
• automatic enrolment for Small Business Rate Relief
• an inflation reprieve for Small Business Rate Relief
• continued support for regulatory reform

With the Prime Minister talking up the idea of increased Government spending to kick start the economy and a give away of £15bn in tax cuts, an immediate cash injection to households is a distinct possibility according to Peter Harrup, Tax partner at PKF.

"If the Chancellor announces another increase in tax allowances in his Pre-Budget speech, employers will have enough time to put the tax cut into every employee’s pay packet before Christmas – just when people are most likely to spend it.

“Backdating the change to the start of the tax year, as he did with the allowance changes in September, could put a useful sum into the wallets of all employees."

Avoiding a repeat of the 2007 Pre-Budget Report debacle

However, the busines advisers, Baker Tilly remind us that Alistair Darling's first Pre-Budget Report, in 2007, contained two extremely contentious proposals – the replacement of capital gains tax taper relief with a simple 18% rate of tax and the reform of non-domicile taxation – both of which have since been watered down.

"There is no evidence that either the Chancellor or the Prime Minister have been forgiven by the public for the previous Budget debacle over the restriction of the 10p tax band. These two issues, allied with the current instability in the world economy, lead us to believe (and compel us to hope) that the Government has learned its lesson on ill-considered tax policy.

"The Pre-Budget Report should not be used by the Chancellor solely as a means to grab positive headlines because, from a business point of view, a sense of stability is needed in these very turbulent times."