As privately owned businesses up and down the country look ahead to the time when they can plot their route back to business as usual after so much upheaval and challenge, they’ll be seeking at least stability from the Chancellor when he delivers his Budget on 3 March.
Most business leaders and owners accept the Treasury will need to raise funds at some point to help pay off our national COVID-19 debts, but sweeping reforms to taxes on corporates just now risks being a little too much to ask at a time of fragile recovery.
However, the changes to our tax system that might have been expected next month, had we not been quite so firmly back into pandemic territory, are surely round the Covid corner, in either the Autumn Statement or next year’s Budget. Business owners should put the deferral to use; planning for a possible raising of the rate of Capital Gains Tax and the introduction of a wealth tax. Indeed, these measures could be announced on 3 March, to take effect in 2022.
In the meantime, Melissa Geiger, our Head of International Tax & Tax Policy, suggests some incremental tax rises could be expected, starting with corporation tax. Having already reversed previous plans to reduce the rate from 19% to 17%, she believes it is possible that the Chancellor may impose a modest increase which will still allow the UK to claim a competitive rate by international standards.
There could also be minor tweaks to National Insurance Contributions and a freezing of personal tax allowances.
The question of an online tax has sparked a good deal of discussion about whether the Chancellor will feel that introducing one might help rejuvenate the High Street as an alternative to online shopping as the economy begins to reopen. However, new business models have been developed based on the current regime. So developments in this area will be carefully watched by emerging new wave companies.
On the other hand, as businesses caught in the eye of the Covid storm will wish, the Budget might reveal further assistance:
It wouldn’t be entirely surprising if the job retention scheme were extended, with the Chancellor taking an ‘in for a penny, in for a pound’ approach to investing in furlough, rather than risk more dramatic job losses, having protected them for so long.
There could well also be an additional rates holiday for retail, hospitality and leisure sectors.
But what of actual growth stimulus to help the economy recover?
The first Freeports could be announced and would be expected to have a significant impact on the regions behind successful bids, and also playing a part in the levelling up agenda given Freeports are expected to be created in areas that lag the UK average prosperity.
Low carbon innovation is tasked with the dual job of supporting the achievement of the Government’s climate targets and supporting regional economic growth, so the Chancellor might build out its green industrial revolution plans with investment specifics.
Finally, evolution of industrial strategy ambitions more broadly could be signposted, should the Government be ready to share its ‘plan for growth’.