Alastair Darling will reportedly extend the Enterprise Finance Guarantee (EFG) as well as measures which allow small businesses to defer tax bills in Wednesday’s pre-budget report.
With bank credit still proving hard to come by for small businesses, the Treasury will allow companies longer to benefit from several of the schemes that formed part of Darling's £20bn fiscal stimulus package last year.
The Enterprise Finance Guarantee, which provides state support for loans to small businesses, was due to close in March, but will now be extended by at least six months.
The government’s ‘Time to Pay’ initiative allows firms to spread out tax bills, and has allowed 150,000 small businesses to defer £4bn of payments. This will reportedly be extended into 2010.
The Guardian reported that the chancellor, who will be forced to admit that the economy has contracted by 4.75%, instead of the 3.5% projected in April, will also unveil plans to channel funds for cash-strapped start-ups.
While Darling is under pressure to raise revenues to offset the UK’s budget deficit, he’s expected to hold back some tax rises.
“On the eve of a difficult election, the government needs to find a chunk of extra money that doesn’t upset too many voters. So we must expect tax increases and spending cuts with high earners bearing the brunt,” said Richard Mannion, national tax director at Smith & Williamson, the accountancy and financial services group.
“We could see further increases in income tax for high earners, windfall taxes on the financial services, a rise in capital gains tax so that it narrows the gap that is developing between the top rates of tax on income and capital gains, and plenty of anti-avoidance on tax arrangements.
“We might also get a small rise in corporation tax for small companies, National Insurance could be ratcheted up to target those on very high earnings and the salary sacrifice regime could also come under attack,” he added.
Darling is also expected to endorse the findings of the Rowlands Growth Capital Review, led by former private equity chief Chris Rowlands, which looked at the availability of finance for small and medium-sized businesses and the need for a government-backed VC fund.
Rowlands called for the government to encourage City investors to lend to small firms, helping to fill a "funding gap" for entrepreneurs looking to borrow between £2m and £10m.
© Crimson Business Ltd. 2009