The Chancellor should use the Budget to provide small firms with greater scope for offsetting profits against money spent on equipment.
The Finance and Leasing Association (FLA) has urged the government to extend its Enhanced Capital Allowances Scheme.
This, the FLA said, would offer struggling SMEs more financial leeway when it comes to leasing new equipment, such as office technology, commercial vehicles and plant and machinery.
Currently, the Enhanced Capital Allowance only allows up to £50,000 to be immediately offset against taxable profits. But the FLA has proposed removing the £50,000 limit for a trial period.
Asset finance (leasing and hire purchase) funds almost 30 per cent of all UK business capital investment, other than property.
A more generous Enhanced Capital Allowance, the FLA argued, would generate more business growth and, in the longer term, would produce an improved tax-take for the government.
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. Profitable businesses will kick-start the economy, leading to investment and increased revenues.”
