Business wants new roadmap
Chancellor urged to go for simpler tax system
Businesses were asked in a survey of more than 175 UK and international businesses what changes should be made to the UK’s tax system in order to keep the UK open for business following the vote to leave the EU.
They say relief for business expenses can be a big boost while fewer than half (43%) think cutting mainstream corporation tax would be the most effective rate measure.
Nearly three-quarters (71%) called for more relief for genuine business expenses, including the cost of offices and industrial buildings.
The results also underlined an appetite for more certainty from HMRC on how the UK’s tax system will work.
According to the survey, 50% more businesses believe that a reduction in the employment tax burden, such as the rate of employers’ national insurance contributions or the apprenticeship levy, would play a greater role in making the UK a more attractive destination for investment than a further reduction in the headline rate of corporation tax.
In terms of indirect tax, 50% of companies felt that measures to ensure that UK organisations did not suffer in relation to the speed of VAT recovery would have a major impact.
Nearly two-thirds (63%) of businesses in the financial services sector said a cut in the rate of VAT would have the most positive effect in terms of making the UK more attractive for them to invest.
Laura Mair, tax partner at EY Scotland, said: “With the Autumn Statement on the horizon, there is an opportunity to take a fresh look at the tax system. The mainstream corporation tax rate has always been a visible factor in showcasing the UK but the Government should look elsewhere if it wants to make a more significant and long-lasting positive impact.
“That means having a system that taxes profits and provides relief for genuine business expenses rather than ignoring the cost of industrial buildings, offices and other essential expenditure.
“By charging tax on profits falsely inflated by ignoring such costs, the Government adds complexity and also distorts who pays corporation tax, penalising infrastructure precisely at the time that the UK is looking to maintain and enhance investment in this sector.”
EY also urged the Government to re-examine the current system of tax administration with a view to providing greater clarity.
Seventy-five per cent of survey respondents said that responsive and constructive clearance rulings from HMRC would make the biggest difference for their business in terms of positive impact. More than seven out of 10 (72%) believed that more joined up policy making between business and Government was the answer.
Mair added: “There is a clear desire for certainty on how the tax system will work in practice. Businesses need to know the full implications of their actions from a tax perspective if they are to be able to respond quickly and decisively.
“The Chancellor needs to replace the Business tax roadmap published by his predecessor earlier this year with a blueprint for the future that sets out the Government’s principles on tax.”