More businesses expect taxes to rise rather than fall after the next general election, according to the latest research from 500 mid-market businesses.
The research conducted ahead of next week’s Autumn Statement, revealed that more than three quarters of businesses expect to pay the same or higher taxes, while just under a quarter expect them to reduce.
The mood appears to have shifted from earlier this year. An earlier survey in July accountancy and business advisory firm BDO suggested that most firms thought that the UK’s business tax environment would improve after an election.
This change in sentiment may reflect a growing appreciation of the state of the public finances, the outlook for interest rates and the prospects for political change.
While it has been made clear that tax cuts are not likely to be on the agenda at the Autumn Statement, when presented with a number of options that the chancellor should do to help businesses instead, respondents said that investment in HMRC service levels should be his top priority. At 38%, this came ahead of simplifying tax rules (35%) and cutting government spending (27%).
This echoes the findings of a recent survey by the Chartered Institute of Taxation (CIOT) which identified widespread dissatisfaction with HMRC service levels among both tax agents and taxpayers, with a majority of respondents saying that poor service levels were making it harder to do business.
There appears to be a growing – some might say grudging – acceptance among businesses that the current high levels of business taxation may be here to stay and could even rise post the general election
When asked what tax changes the chancellor should introduce once economic conditions improve, the most popular call was for new green tax breaks (31%). This came ahead of demands to cut the headline rate of corporation tax (28%), to make the 100% first year capital allowance permanent (25%) and to cut employers’ NIC (15%).
On a similar green theme, almost three quarters of respondents said they would support the introduction of a new UK carbon border tax to prevent companies from offshoring their carbon emissions.
BDO tax partner Jonathan Hickman said: “Set against a very challenging fiscal backdrop, the chancellor has already warned that tax cuts are off the table at the Autumn Statement. There appears to be a growing – some might say grudging – acceptance among businesses that the current high levels of business taxation may be here to stay and could even rise post the general election.
“Businesses do, however, want to see more investment in HMRC so that service levels can improve, as well as a better designed, simpler tax system.
“The proposed reforms to the UK’s complex R&D tax regime, which we may hear more about at the Autumn Statement, will provide an indication of the government’s commitment to tax simplification. However, we are also seeing a high degree of concern among SMEs about the proposed reduced rates of relief with 85% saying they’d consider shifting their R&D functions overseas.
“While the likelihood of such a high proportion of businesses taking this course of action is probably slim, it does nevertheless reflect growing unease about the likely competitiveness of the UK’s future R&D regime when compared to other international jurisdictions.
“Our survey also shows an encouraging willingness among middle market businesses to reduce their environmental impact, but they are looking for the government to introduce new green tax breaks to help them do so.”
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