According to Praveen Gupta, head of tax at Azets, SMEs are being “starved of cash” with the leader now calling for Chancellor Rishi Sunak to use tax relief as a means to “help businesses retain cash flow”.
With the Budget set to be announced on 3 March, Azet has suggested that extending the 5% VAT hospitality rate to all VAT registered businesses, and supporting start-ups with a 10% corporation tax on turnover up to £500k would provide SMEs with the “cash and the time they need to survive into 2022 and beyond”.
In addition, Azets has also said that the government should look to reduce corporation tax to 15% and double the annual investment allowance to £2m to encourage small businesses to invest more.
Gupta said: “A perfect storm is looming in the next few months when furlough comes to an end and banks start demanding repayment of loans that were deferred under the repayment holiday scheme. Banks will also look to recover CBIL and BBLs loans 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.”