Labour's manifesto aims to rebuild the economy with a focus on growth, social justice, and sustainability. Key proposals include capping corporation tax at 25%, enhancing R&D credits, and comprehensive audit reform. Accountants must adapt to these changes, providing strategic guidance and ensuring compliance with new regulations.
The Labour Party’s newly released manifesto for the upcoming election, titled “Change,” aims to rebuild the country with a focus on economic growth, social justice, and environmental sustainability.
Keir Starmer, Labour’s leader, emphasises the need for a strategic partnership between the government and businesses to drive long-term investment and innovation.
The manifesto outlines ambitious plans to address key issues such as corporation tax, R&D credits, and audit reform.
Labour’s manifesto proposes a balanced approach to corporation tax, aiming to restore economic stability while ensuring businesses can thrive.
The party plans to cap corporation tax at 25%, the lowest in the G7, providing long-term certainty for businesses. This move is designed to foster a stable investment environment, crucial for economic growth.
Labour also commits to retaining a permanent full expensing system for capital investment and the annual investment allowance for small business.
The manifesto also emphasises the importance of strategic investment, proposing a National Wealth Fund to support transformative projects. This fund aims to attract private investment, creating jobs and boosting productivity.
By maintaining a competitive corporation tax rate, Labour seeks to balance the need for public revenue with the imperative to encourage business growth.
With the corporation tax capped at 25%, accountants will need to guide businesses in leveraging this stability for long-term planning.
Labour’s manifesto places a strong emphasis on fostering innovation through enhanced Research and Development (R&D) credits.
Recognising the pivotal role of R&D in driving economic growth, the party aims to create a more supportive environment for businesses investing in new technologies and processes.
The manifesto outlines plans to increase the scope and value of R&D tax credits, making it more attractive for companies to invest in innovation. This initiative is expected to stimulate advancements in various sectors, from technology to manufacturing, thereby boosting the UK’s competitive edge globally.
For accountants, this means staying abreast of the latest changes in R&D tax credit policies to provide accurate and strategic advice to clients. Understanding the enhanced incentives will be crucial for helping businesses maximise their R&D investments.
Among the other tax announcements included in the manifesto, Labour said it will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT. They plan to ensure taxes on working people are kept as low as possible.
The party will however will modernise HMRC and change the law to tackle tax avoidance. This includes increasing registration and reporting requirements, strengthening HMRC’s powers, investing in new technology, and building capacity within HMRC.
Alison Conley tax partner at MHA says of the confirmation that the Labour manifesto does include a reference to change the way fund managers are taxed.
“The current tax treatment of carried interest has been established practice for many years and in essence, provides that fund managers are subject to capital gains tax at the highest rate on their economic gain from carried interest (currently 28%),” she says.
“The proposal of the Labour Party to align this to income tax rates will have a significant impact on UK fund managers, at a time when the number of new UK fund launches is at a 20 year low.”
Carried interest aligns the interests of managers with investors and as such, could disincentivise asset managers or lead them to consider alternative remuneration strategies or the feasibility of moving to a lower taxed jurisdiction (especially if non-dom).
“From our experience and conversations with clients, the announcement today will move the feasibility of relocating overseas significantly up the agenda, whilst higher taxes are unlikely to attract new talent to the UK,” says Conley.
Labour’s manifesto underscores the need for comprehensive audit reform to enhance transparency and accountability in corporate governance.
Specifically, it states that Labour will “reform auditing and accountancy standards to address conflicts of interest” and will ensure that “audits provide a true and fair view of the company’s financial health.” This is part of their broader plan to enhance transparency and accountability in corporate governance.
The manifesto proposes the establishment of a new regulatory body to oversee the audit sector, ensuring that audits are conducted with greater rigor and independence.
This body will have the authority to enforce stricter standards and impose penalties for non-compliance, thereby restoring public trust in financial reporting.
These reforms mean adapting to a more stringent regulatory environment. Accountants in both industry and practice will need to enhance their audit procedures and documentation to meet the heightened expectations.
You can find our guides to the Conservative manifesto and Liberal democrat manifesto, here.
