Rachel Reeves should cut corporation tax to 15% and increase the VAT registration threshold above £200,000, says accountancy and business advisory firm Azets.
They are two of seven suggestions the firm has sent to the Chancellor ahead of next week’s Budget.
Praveen Gupta, Azets’ UK head of tax, called for Ms Reeves to “encourage and enable SMEs to invest, innovate and grow, and, in turn, support the UK’s economic growth.”
He added: “At present, local SMEs need a boost. After five years of rising costs they need support to grow, evolve and innovate and to help support their local economies, supply chains and communities by doing so.”
Research from the Federation of Small Businesses shows that SMEs account for around 60% of the UK’s total employment and generate around £2.8?trillion for the economy.
But, said Mr Gupta, “the reality is that many are struggling in the current economic climate”.
Lowering the rate of corporation tax to match Ireland would, he concedes, result in an initial reduction in the Treasury’s income, but it would encourage businesses to expand.
Raising the VAT threshold “would mean that smaller businesses, especially start-ups, would register at a slightly later time, he said.
The policy suggestions also include an employment tax roadmap to give SMEs more time to implement changes, as well as reform of R&D tax relief and business rates which, he says, currently penalise businesses that need to occupy space and discourages them from investing in larger premises.
“A multiple based on revenue and profit levels and employee numbers would result in a fairer system and raise additional revenue for the Treasury,” says Mr Gupta.
He also calls for the base threshold for Quarterly Instalments Payments for SMEs to be increased to £3m from £1.5m, and full expensing on capital allowances broadened to include second-hand assets and assets for leasing.
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