A&M Tax Advisor Update
The Chancellor told us today that the era of austerity is “finally coming to an end” – note the careful language; not “over”.
The detailed Budget notes strongly emphasise the need for a “fair” tax system. Whilst one can see what the Chancellor is trying to achieve, the missing piece of the puzzle is the transformation to a simpler tax system that encourages international businesses to locate here other than by virtue of the low corporate tax rate. With a tax code already longer than the US, we are alas the global champions in having the most complex tax system in the world. This has a significant impact on the cost of doing business, a cost which shouldn’t be underestimated.
For example, we are back to Industrial Buildings Allowances (IBAs) reinstated for the 21st century and at 2 per cent per year, rather than the 4 per cent of old. But at the same time, relief on special rate spend has dropped from 8 per cent to 6 per cent. The Annual Investment Allowance (AIA) is also increased but only temporarily.
Much will be said about the new digital tax – however the forecast tax raise in 2020/21 is estimated at only £275 million – it sounds like a lot but doesn’t even scratch the surface when compared to the £60 billion the government raises through corporate taxation. Was this worth the UK taking a position ahead of the rest of the world at a time when we will be leaving the EU?
The business tax world of tomorrow is more complex than it was yesterday. This continues a trend over the last few years. It may be good for tax advisers but it is not so great for the UK economy.