The Forum of Private Business has published its 'wish list’ for the Chancellor’s pre-Budget Report. Gordon Brown will deliver what is widely expected to be his final pre-Budget speech to Parliament next Wednesday.
The FPB, which represents 25,000 small and medium-sized firms in the UK, wants a number of areas to be addressed by the Chancellor.
They include: lightening the tax and red tape burden; slowing the increase in the National Minimum Wage; giving a percentage of government contracts to small firms and a shift of emphasis in education to reflect the needs of smaller businesses.
FPB chief executive Nick Goulding said the moves would promote productivity, competitiveness and employment for the UK economy.
He insisted: "It’s clear that Mr Brown has work to do to win round owners of smaller businesses who are frustrated at having their profitability and growth restricted by a Government that does not listen to them."
The FPB wants the return of the nil rate starting band on Corporation Tax for the first #10,000 of profits. Mr Goulding said its removal had left small firms with a bigger tax headache.
"Thousands of micro businesses now face an extra bill of up to #1,900 a year because of the change announced in the last pre-Budget speech. Bringing it back would encourage thousands of sole traders and partnerships to set up limited companies, as it did in 2002 when it was introduced. Many of those firms now find themselves unable to revert to their prior business status without being subject to capital gains tax."
If the Chancellor wants to recoup the money, then the FPB is urging him to close the loophole created by Low Value Consignment Relief on certain goods imported from the Channel Islands. It estimates an extra #80 million would have been generated in the last year in VAT from firms now exploiting the system.
Major names such as HMV have relocated some operations to the Channel Islands in order to sell goods to the UK without the imposition of VAT.
LVCR was designed to cut the cost of importing individual goods, worth #18 or less, by exempting them from VAT. However many large retailers have taken advantage of this by moving to the Channel Islands, exporting goods such as CDs and DVDs manufactured in the UK, selling them online and then re-importing them into the UK without VAT. High street retailers and those who can’t afford to relocate to the Channel Islands can’t compete and are being driven to the wall.
It has also written to the European Commission to urge it to act over the loophole.
The FPB also believes the Chancellor must simplify the VAT registration process and integrate NI with income tax for schedule E taxpayers. Mr Goulding said simplification would free the hands of smaller firms.
It says the National Minimum Wage is an increasing burden on smaller firms, discouraging them from taking on new employees. The latest rise in October from #5.05 to #5.35 has added to the pressure. Mr Goulding wants to see the NMW linked to the Retail Price Index.
"The increases have been well above earnings growth, and periods between increases are too short. The level and rate of change in the NMW is hampering competitiveness and job creation amongst smaller firms." The FPB is also demanding that the Government open up its contracts to smaller firms. Public procurement remains an exclusive club for bigger firms to enjoy and their smaller counterparts to be excluded from, it claims.
Mr Goulding said: "Smaller businesses are shut out of the public procurement market by Government departments' excessive bureaucracy, tendency to favour established suppliers with large reputations, and irrational risk-aversity."
The FPB wants a percentage of Government contracts set aside for smaller businesses. On education it wants the needs of smaller firms at the heart of the proposals in the Education Bill. A tax credit should be introduced to help employees who are not qualified to continue with professional development, it says.