The CBI has warned of a further backlash over rising taxes for the corporate sector which risk undermining business investment. Tony Danker, head of the CBI, accused the government of ‘taking the easy option’ of turning to companies to fund higher public spending. Danker called for an end to further business tax increases, and he also expressed concern over the lack of detail and pace of change from the government on some of the big economic choices. He said ‘smarter taxation’ was needed ‘which rewards those firms who invest, rather than the current business rates system, for example, that perversely taxes more than half of business investments’.
Sarah Gabbai, attorney at law firm McDermott Wil & Emery, said: ‘The new health and social care levy, coupled with the upcoming increase in the rate of corporation tax, will be a double whammy for corporate employers and contractor-hirers going forward. Not only are they likely to have a deterrent effect on inward investment into the UK going forward, but could also discourage economic migration to the UK, since the incidence of taxation will ultimately hit employees in the form of lower wage growth due to increased taxation costs for the business.
‘In addition, we are already seeing freelance workers and contractors becoming inadvertently involved in non-compliant umbrella company arrangements whose main objective is to avoid employer’s NICs,’ Gabbai said. ‘The new HSC levy will merely make this problem even worse, and thus make the contractor hiring process even more risky. More specifically, it could lead to businesses becoming involved in the facilitation of NICs avoidance or even fraud, unless proper prevention procedures are put in place. Companies and partnerships will need to be mindful of this increased risk and make sure they have suitable procedures in place, as we could well see HMRC stepping up its investigations in this area in the coming months.’
Charlotte Sallabank, partner at Katten Muchin Rosenman, said: ‘The government seems to be hoping to increase the tax take overall through increased tax rates whilst stimulating investment through reliefs, rather than through low headline tax rates. But of course to be eligible for investment reliefs requires satisfying the necessary conditions which are often very detailed and ongoing. So the relief, whilst sounding attractive, may not be particularly easy for the taxpayer to obtain in the first place, and then hard to maintain eligibility for. Tax reliefs and incentives usually come with specific anti-avoidance provisions, such as a mini GAAR, which can lead to uncertainty – where is the line in the sand between acceptable structuring to fall within the relief and unacceptable tax avoidance by taking contrived steps to satisfy the necessary criteria? Low tax rates, however, are available to all but the government is setting great store, it seems, by its freeports legislation as a way to attract investment into the UK.’
The CBI has warned of a further backlash over rising taxes for the corporate sector which risk undermining business investment. Tony Danker, head of the CBI, accused the government of ‘taking the easy option’ of turning to companies to fund higher public spending. Danker called for an end to further business tax increases, and he also expressed concern over the lack of detail and pace of change from the government on some of the big economic choices. He said ‘smarter taxation’ was needed ‘which rewards those firms who invest, rather than the current business rates system, for example, that perversely taxes more than half of business investments’.
Sarah Gabbai, attorney at law firm McDermott Wil & Emery, said: ‘The new health and social care levy, coupled with the upcoming increase in the rate of corporation tax, will be a double whammy for corporate employers and contractor-hirers going forward. Not only are they likely to have a deterrent effect on inward investment into the UK going forward, but could also discourage economic migration to the UK, since the incidence of taxation will ultimately hit employees in the form of lower wage growth due to increased taxation costs for the business.
‘In addition, we are already seeing freelance workers and contractors becoming inadvertently involved in non-compliant umbrella company arrangements whose main objective is to avoid employer’s NICs,’ Gabbai said. ‘The new HSC levy will merely make this problem even worse, and thus make the contractor hiring process even more risky. More specifically, it could lead to businesses becoming involved in the facilitation of NICs avoidance or even fraud, unless proper prevention procedures are put in place. Companies and partnerships will need to be mindful of this increased risk and make sure they have suitable procedures in place, as we could well see HMRC stepping up its investigations in this area in the coming months.’
Charlotte Sallabank, partner at Katten Muchin Rosenman, said: ‘The government seems to be hoping to increase the tax take overall through increased tax rates whilst stimulating investment through reliefs, rather than through low headline tax rates. But of course to be eligible for investment reliefs requires satisfying the necessary conditions which are often very detailed and ongoing. So the relief, whilst sounding attractive, may not be particularly easy for the taxpayer to obtain in the first place, and then hard to maintain eligibility for. Tax reliefs and incentives usually come with specific anti-avoidance provisions, such as a mini GAAR, which can lead to uncertainty – where is the line in the sand between acceptable structuring to fall within the relief and unacceptable tax avoidance by taking contrived steps to satisfy the necessary criteria? Low tax rates, however, are available to all but the government is setting great store, it seems, by its freeports legislation as a way to attract investment into the UK.’
