More PBR speculation

Richard Tyler, entreprise editor of the Daily Telegraph, makes some interesting predictions. He reminds us that some existing taxes are going up. Not least VAT, back to 17.5pc after the 2.5pc point reduction for the past 13 months. It is meant to take effect on January 1 but the Chancellor is likely to say that small businesses have been given 28 days to change their pricing after the New Year.

There is a chance that the Chancellor could signal that VAT will rise further. A draft Treasury document sent to the Commons library by mistake after last year’s pre-Budget report showed that the Treasury had seriously considered increasing VAT to 18.5pc in 2011. If this turns out to be true it would raise £5bn.

Mr Darling also has to decide whether to go ahead with the one percentage point rise in smaller company corporation tax from 21pc to 22pc. He has delayed it once and could do so again. And despite adding to the cost of hiring staff, employers’ national insurance contributions are still due to rise by 0.5 percentage points in April 2011.

The main changes will be in personal taxation. But how much detail the Chancellor provides before the General Election is anyone’s guess. The new 50pc higher band of income tax for those earning over £150,000 a year, the clawback of personal allowances for those earning over £100,000, and the restriction of tax relief on pension contributions for those earning over £150,000 are all coming in.

Smaller company owners will look to see if Mr Darling keeps the threat of a family business tax in the box. Before the recession, the Treasury was keen to tackle companies using dividends to distribute income to related parties to avoid national insurance contributions. Speculation is also rife that capital gains tax could rise from its 18pc flat rate, given that a 50pc rate of income tax provides a strong incentive to take income as company shares. Accountants PKF say that the Chancellor may announce that short term gains, for example, gains made on assets held for less than a year, will be liable to tax at income tax rates.

The Government wants to be seen to be helping businesses. So expect to hear about the success of HMRC’s time to pay service – used by 150,000 businesses to defer £4bn in tax over the last year. There may also be an update on the Chancellor’s own pet scheme to allow businesses to defer up to 60pc of this year’s inflation-busting rise in business rates for up to two years.

The future of financing schemes, like the £1.1bn Enterprise Finance Guarantee, a bank loan scheme that comes to an end next March, should also be made clearer. There should also be an announcement on the launch of a series of new Government-backed equity and mezzanine debt funds, to be delivered by a National Investment Corporation and designed to tackle the lack of private money investing in small and medium-sized companies.

More money may also be set aside to encourage businesses to hire staff and take on apprentices. On the downside, training subsidies through schemes like Train2Gain could potentially be cut. He is likely to talk about his efforts to build a low carbon, knowledge economy and may even offer a few small incentives to encourage the take up of environmental technologies.

We will just have to wait to see.