Aileen Scott: Budget tax cuts wish list essential to protect SME community
Aileen Scott, head of tax in Scotland with Azets, discusses why the forthcoming Budget must further relax business taxes and minimise the growing risk of closures and redundancies across the SME community.
Businesses are being starved of cash and the Chancellor must use tax relief to help businesses retain cash flow.
Without cash, a business cannot survive and there are too many businesses now in that position. There is already a cash flow crisis which is threatening the backbone of our economy and, unless tackled urgently, will trigger the closure of many otherwise sound businesses.
The Chancellor last year introduced a raft of measures that protected businesses and prevented mass unemployment, however, many businesses that are now mothballed, such as in the hospitality sector, are still having to maintain buildings, pay insurance and finance debt. In addition, Furlough will end soon, and payments are due to start on CBIL and BBL loans that were arranged last year.
Time and cash are the key to prevent the large number of distressed businesses becoming closed businesses. The economy needs the Chancellor to go further with support measures, and the most effective way is to ease business taxes. It means further Government borrowing but it is a necessary and vital intervention.
Aileen Scott outlined eight essential Tax reductions and reliefs that would provide businesses with the cash flow and time they need to survive into 2022 and beyond:
- Extend the 5% VAT hospitality rate to all VAT registered businesses
- Encourage investment by doubling the annual investment allowance to £2m
- Support start-ups with a 10% Corporation Tax on turnover up to £500,000
- Encourage recruitment by reducing employers NIC to 12% (currently 13.8%)
- Support youth recruitment with employers NIC rate of 10%
- Encourage investment in technology with 200% capital allowances up to £1m
- Support entrepreneurship by maintaining lifetime relief at £1m
- Reduce corporation tax to 15% (currently 19%).