Make or break Budget time for Alistair Darling

With the country in the midst of a recession and an election looming next year, this week's Budget is make or break time for Chancellor, Alistair Darling.

Neil Sturmey, managing partner of Liverpool's largest accountancy practice Grant Thornton, has been looking at the issues which the Chancellor should be addressing.

With banks tightening lending criteria, Neil believes the Budget needs to address tax incentives to stimulate the larger amount of equity flow which is needed into entrepreneur businesses.

He believes that one way to address this is to introduce a simplified and enhanced Enterprise Investment Scheme (EIS). This is a Government scheme that provides a range of tax reliefs for investors. Currently investing via EIS gives tax relief at 20 per cent, however there have been rumours that income tax relief may be increased to as much as 40 per cent.

According to Neil, this would be a welcome outcome, which would encourage investors to put much needed risk equity back into business.

He would also like to see the Chancellor's Budget tackling ways of helping property investors and SME's through the current economic downturn.

Property has never benefited from as advantageous a tax system as that for trading companies, such as those in manufacturing industry. But, in today's unstable economy, he thinks the Budget should look to at least temporarily introducing for property investors the better tax breaks that apply to trading companies.

This could, Neil believes, provide a platform to help investor/developers in the difficult property market, particularly with reference to the Government's aim to increase the supply of private rented homes.

In terms of helping SME's, he would like to see the Chancellor further delay the Government planned increase in the small companies' rate of corporation tax to 22%. The rate increase was scheduled to come into force in April 2009 and it was announced in the pre-budget report that the increase would be delayed at least until April 2010.

But, Neil would like to see the increase delayed until at least April 2011. He said: "This will allow small companies to get back on an even keel before this rate increase is enforced. Steady cash flow management is essential for businesses in these uncertain economic times and an increase in the rate of corporation tax is another burden that small companies can live without".