FLA Calls For Chancellor To "Get Britain Lending"

8 April 2009

In its Budget Submission to the Chancellor the Finance & Leasing Association has proposed an extension of capital allowances for SMEs.

The aim is to pump-prime struggling small businesses so that they can continue to obtain finance for investment by leasing new equipment, such as office technology, commercial vehicles and plant and machinery. The proposal has the backing of the Association of Chartered Certified Accountants, the National Federation of Enterprise Agencies and the Forum for Private Business.

The proposal is to extend the Government's Enhanced Capital Allowances Scheme, so that SMEs can offset more business equipment against taxable profits. Currently the Enhanced Capital Allowance only allows up to £50,000 to be immediately offset against taxable profits. The FLA proposes removing the £50,000 limit of this allowance for a trial period.

Small businesses are the lifeblood of Britain's economy. Asset finance (leasing and hire purchase) funds almost 30% of all UK business capital investment, other than property. The more generous tax breaks that the FLA is proposing will generate more business growth and hence more taxes in the longer term. The initial cost to the Treasury is expected to be less than £30 million.

Stephen Sklaroff, Director General of the FLA, said:

"Our aim is to get businesses investing. Funds need to be available, and investment needs to be affordable. We are discussing with the Government how to ensure a continued flow of funds to businesses via asset finance. This further proposal would ensure that business investment was more affordable for more businesses and would be a win both for the Exchequer and for SMEs. We believe that successful SMEs are the key to economic recovery. Profitable businesses will kick-start the economy, leading to investment and increased revenues."

Dr Steve Priddy, director of technical policy at ACCA said:

"SMEs make up an overwhelming majority of businesses in the UK and they are central to the economic recovery. We back what the FLA is proposing; it makes sense to ensure tax breaks for SMEs are available, especially in the current climate. Extending capital allowances for SMEs, even over a trial period, would give SMEs a much-needed break."

Phil Orford, Chief Executive of the Forum for Private Business, said:

"Rebuilding confidence is key to ensuring that small businesses are able to survive and, ultimately, as the economy recovers, begin to grow again. Improving the corporate tax system to better support investment is one way to achieve this".

George Derbyshire, Chief Executive of the National Federation of Enterprise Agencies, said:

"Many growing businesses need to make substantial investments in new equipment. Making such investment more affordable could help economic recovery".

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