The government is right to aim to make the UK's corporate tax system as internationally competitive as possible, but needs to bear in mind that the most important aspects of the system are that it is stable, consistent and delivers certainty, tax experts have warned.
‘The last minute and precipitate change in oil tax rates seems wrong,' the Chartered Institute of Taxation said, for an industry that is ‘particularly dependent’ on long-term planning.
In evidence to the Commons Treasury Committee, published as MPs prepared to debate the Finance Bill, the CIOT warned that the ‘constant changes’ to the Bank Levy need to end.
‘It is surely better to evolve changes to the way sectors are taxed through consultation rather than pull the changes out of the Budget box,’ the tax body argued. ‘That would allow time to assess international implications.’
The Treasury Committee had invited accountancy professional bodies to consider the extent to which the Finance Bill provisions meet the criteria set out in the committee’s recent report, ‘Principles of Tax policy’.
The ICAEW Tax Faculty said it understood the rationale for the decision to increase the supplementary charge for 'ring fence trades' (clause 7 of the Finance Bill) but warned that imposing unexpected tax charges with immediate effect is ‘likely to cause damage to the UK’s competitiveness’.
It added that a proposal to restrict tax relief for decommissioning expenses to 20% rather than the new 32% rate ‘seems to be unfair’.
The Tax Faculty said businesses would welcome the additional 1% reduction in the main corporation tax rate but the reduction in capital allowances is likely to mean that ‘capital intensive businesses such as manufacturing will be net losers’. The capital allowances rules fail to meet the Treasury Committee’s principle of stability in the tax system because they appear to change every year, the Faculty observed.
ACCA said the reductions in main rates of corporation tax were clear, simple and broadly expected, but the increase in the rate of tax on ring fenced profits was unexpected and ‘fails on the principles of stability and supporting growth’.
‘There may be a justifiable economic and social basis for the rebalancing of oil taxation from final consumers to producers. However, the sudden change in rate came as a shock to those involved in the North Sea oil industry, and has been widely condemned as reducing the competitiveness of the UK as a target for investment,’ ACCA added.
The Chancellor claimed in his Budget speech to have taken over 100 pages of legislation out of the statue book by abolishing redundant reliefs, ACCA said. ‘However, the [Employment income provided through third parties] provisions alone [in clause 26 and Sch 2] add 59 of those pages straight back again’.
The government is right to aim to make the UK's corporate tax system as internationally competitive as possible, but needs to bear in mind that the most important aspects of the system are that it is stable, consistent and delivers certainty, tax experts have warned.
‘The last minute and precipitate change in oil tax rates seems wrong,' the Chartered Institute of Taxation said, for an industry that is ‘particularly dependent’ on long-term planning.
In evidence to the Commons Treasury Committee, published as MPs prepared to debate the Finance Bill, the CIOT warned that the ‘constant changes’ to the Bank Levy need to end.
‘It is surely better to evolve changes to the way sectors are taxed through consultation rather than pull the changes out of the Budget box,’ the tax body argued. ‘That would allow time to assess international implications.’
The Treasury Committee had invited accountancy professional bodies to consider the extent to which the Finance Bill provisions meet the criteria set out in the committee’s recent report, ‘Principles of Tax policy’.
The ICAEW Tax Faculty said it understood the rationale for the decision to increase the supplementary charge for 'ring fence trades' (clause 7 of the Finance Bill) but warned that imposing unexpected tax charges with immediate effect is ‘likely to cause damage to the UK’s competitiveness’.
It added that a proposal to restrict tax relief for decommissioning expenses to 20% rather than the new 32% rate ‘seems to be unfair’.
The Tax Faculty said businesses would welcome the additional 1% reduction in the main corporation tax rate but the reduction in capital allowances is likely to mean that ‘capital intensive businesses such as manufacturing will be net losers’. The capital allowances rules fail to meet the Treasury Committee’s principle of stability in the tax system because they appear to change every year, the Faculty observed.
ACCA said the reductions in main rates of corporation tax were clear, simple and broadly expected, but the increase in the rate of tax on ring fenced profits was unexpected and ‘fails on the principles of stability and supporting growth’.
‘There may be a justifiable economic and social basis for the rebalancing of oil taxation from final consumers to producers. However, the sudden change in rate came as a shock to those involved in the North Sea oil industry, and has been widely condemned as reducing the competitiveness of the UK as a target for investment,’ ACCA added.
The Chancellor claimed in his Budget speech to have taken over 100 pages of legislation out of the statue book by abolishing redundant reliefs, ACCA said. ‘However, the [Employment income provided through third parties] provisions alone [in clause 26 and Sch 2] add 59 of those pages straight back again’.
