DORSET'S owners of small businesses are warned to be prepared for the worst when Chancellor Alistair Darling stands up to announce his first budget in the House of Commons next week.

The Forum of Private Business (FPB) is predicting the 2008 Budget is likely to heap an unfair tax burden on to many smaller concerns. And it is concerned its members will pay for the tax breaks the government plans to hand big businesses.

"The FPB is urging the chancellor to radically rethink many of his ideas, in particular his tax plans, which specifically disadvantage smaller businesses," said FPB policy representative, Matt Goodman.

"Issues like excessive legislation, unfair competition and the dearth in work-ready, skilled employees leaving education must also be addressed as a matter of priority."

Research by the FPB showed 97 per cent of respondents believe recent tax changes have made the UK a worse place to do business.

In his Pre-budget Report, and the Comprehensive Spending Review, the chancellor revealed small firms' corporation tax contributions will increase from 19 to 22 per cent from April. However, the higher rate of tax to be paid by large firms will be reduced from 30 to 28 per cent.

In addition, Capital Gains Tax (CGT) taper relief will be brought to an end. Following sustained pressure from the FPB and other groups, the government partially restored the 10 per cent rate, but, after the first £1 million in asset sales, the higher 18 per cent rate will still be imposed. Mr Darling also plans to remove indexation, by which CGT calculations were adjusted favourably to take account of inflation.

Clamping down on "income shifting" - where business owners transfer income as dividends or partnership profits to an employee who pays a lower rate of tax - will require businesses to quantify the contribution of partners and family members, creating, says the FSB, a huge administrative burden.

The FPB is also calling for employers' National Insurance Contributions (NICs) to be reduced. The current NI exemption for holiday pay will be withdrawn from the end of October 2008.