The Engineering Employers Federation has called on the chancellor to review his phased abolition of advance corporation tax because the effect it will have on cashflow will cause further damage to industry.
The four-year transitional phasing out of the tax will mean some firms will have to pay five years’ tax in four years, with an expected £7.9bn windfall for the Government from 1999 to 2004.
Big companies will also have to pay tax quarterly.
Graham Mackenzie, EEF director general, said the proposals will add to the cashflow problems already facing industry, generated by falling orders caused by the high value of sterling.
‘Firms will respond by cutting investment,’ he said.
In its Budget submission, the EEF called for a renewal of the 12 month capital allowances for small businesses, and more tax breaks to boost R&D spending.