Chancellor George Osborne is expected to include a number of measures to help businesses in the Budget without doing anything “too flashy”, according to a finance expert.
Osborne is due to reveal his plans for the nation’s coffers less than a week after the Fitch credit ratings agency put the UK’s top AAA rating on “negative outlook”.
With Britain at risk of being downgraded in the next few years, this Budget could take on even greater significance.
Chris Redfern, business client dealer at Moneycorp, explained that the credit warning should reduce expectations for tax relief among bosses.
“It just reminds everyone that there is a massive job at hand here to cut this country’s spending and cut the deficit we have,” he said. “We can’t afford at the moment to be giving out massive tax breaks when there is still such a big problem to deal with.”
In the run up to the Budget, a number of issues relating to SMEs have been brought into focus. One of the biggest concerns is the amount of red tape restricting firms. The Federation of Small Business is one organisation that has been campaigning on this issue, demanding improved access to finance.
Graham Morgan, corporate tax partner at Kingston Smith LLP, said strict regulation is strangling growth prospects.
“When small businesses reach a certain size, their next step must become a leap due to the cumulative impact of regulatory requirements – which they are not equipped to handle,” he said.
“As a result, many small businesses are simply not able to take the plunge at what would otherwise be a crucial stage of growth.”
Meanwhile, the Centre for Policy Studies (CPS) has urged Osborne to go further with planned cuts to corporation tax, but Morgan can’t see this happening.
As part of last year’s Budget, Osborne revealed that the levy on businesses would be cut down to 23 per cent by 2014. The CPS says reducing it further to 20 per cent would boost confidence, overseas investment, and provide increased revenues.
But Morgan added: “Such drastic cuts are unlikely given the parlous state of the public finances, but the chancellor may give a nod towards further long-term reductions, perhaps accompanied by a realignment of the tax base to pay for them.”
However, tax relief for research and development might just be an exception to the rule, as the government looks to reshape the economy.