Pre budget report predictions |
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Economy
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Written by Roberta Murray
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Wednesday, 19 November 2008 |
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PricewaterhouseCoopers say increased cash flow assistance for small business are very likely. PricewaterhouseCoopers LLP (PwC) is predicting the odds for what might appear in the Chancellor of the Exchequer’s Pre-Budget Report (PBR) speech.
PwC says the odds of the Chancellor announcing an increase in assistance for small business stand at 2-1.
The company cites the need to help hard-pressed businesses facing cash flow problems as being why we can expect an announcement.
It is also expected the planned 1% increase in small companies’ rate of corporation tax will be cancelled, the odds on this are even.
The small companies’ rate of corporation tax is due to increase from 21% to 22% from April 2009. Cancelling the tax rise would be a welcome signal to smaller businesses.
Besides, as more companies struggle and make losses, it is unlikely that the Treasury will reap the full, projected £400 million tax revenues to be gained by the planned 1% rise.
In many cases tax bills for last year's good profits are falling just when the business has turned down dramatically. The Chancellor can't cancel such bills but he could make it quicker for small companies to get loss relief when losses are being made and allow a longer period for losses to be carried back.
This year’s Pre-Budget Report (PBR) is less than a week away (Monday 24 November 2008) and it seems increasingly likely it will bring some tax cutting measures.
John Whiting, tax partner, PricewaterhouseCoopers LLP, said:
“If the Chancellor is going to cut taxes he has a lot of choice. There is talk of him having £15 billion in his purse for a fiscal stimulus: he's likely to spend this on a range of goodies, particularly ones targeted at the less well off, than blowing it all on one big measure.
“The Chancellor must also spare some thought for companies if the UK is to remain an attractive place to do business, so we would hope to hear more about how UK fiscal policy is going to help make doing business easier in these uncertain economic times.”
Other predictions by PwC
Reduce VAT by 2 ½% to 15% - 6-1
Costing about £12 billion, the Chancellor would still be left with some change in his back pocket from the mooted £15 billion, but this would be a 'big bang' approach.
On the plus side, VAT is seen as a regressive tax and so a rate cut would help taxpayers on low incomes. It would be a timely helping hand for parents whose children have imported computer and electronic products on their Christmas lists - but that in turn shows how the benefit of such a fiscal stimulus will partly leak out of the UK. A modest cut – 1% say – seems more likely.
Extra for targeted tax credits - Evens
The Chancellor could spend more on working tax credits and child tax credits to help low income individuals and families. These and other benefits should rise from April 2009 in line with September inflation of some 5%. Confirmation of full up-rating, with perhaps a little more added, would help many cope with higher food and energy prices.
A clearly articulated strategy for the taxation of foreign profits - 1-2 on
The long running and high profile discussions about reforming the way overseas profits of UK-based multinational companies are taxed has continued. As a minimum, business will be hoping for a commitment to introduce some form of exemption for such profits when already taxed abroad to keep its faith in the prospect of an improved UK system.
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