Election tax policies under scrutiny, accountants demand transparency and innovation

Election tax policies under scrutiny, accountants demand transparency and innovation

As the UK gears up for the general election, accounting and tax experts are calling on the incoming government to address critical gaps in tax policies and provide a clearer roadmap for the future.

Leading audit, tax, and business advisory firm Blick Rothenberg has raised alarms over the misleading nature of tax proposals from major political parties.

Robert Salter, Tax Technical Director, emphasized that both Labour and Conservative manifestos fall short in addressing the real risks and complexities of their tax plans. Salter pointed out that Labour’s proposed £8bn tax raise is negligible compared to the £1,000bn annual government tax revenue.

Meanwhile, Conservative promises of National Insurance cuts and a special personal tax allowance for pensioners lack economic rationale and risk increasing tax burdens elsewhere.

“While economic growth might provide all parties with some additional tax revenues – which is clearly what they are hoping for, the fact is that this is unlikely to provide any of them with significant extra tax revenues,” says Salter.

He also note it is “equally valid to critique the policies of the Liberal Democrat, Green, and Reform parties.”

“None of the parties are fully addressing the various tax anomalies within the UK tax system which can result in taxpayers having marginal tax rates of 55% – 60% (or even significantly higher in some situations), despite the UK’s official, top rate of income tax being only 45%,” he says.

Balancing Tax Policies to Foster Growth

Vipul Sheth, MD of Advancetrack, has urged the next government to implement balanced tax policies to retain talent and encourage entrepreneurship.

Sheth highlighted the importance of maintaining favourable conditions for non-domiciled residents and enhancing Entrepreneurs’ Relief. He argued that excessive taxation could drive away wealthy individuals, decreasing overall tax revenue, and stressed the need for moderate tax policies that have historically resulted in higher tax collections.

“Two critical areas of focus are the taxation of non-doms and Entrepreneurs’ Relief. Politicians must recognize the very wealthy are highly mobile. Countries such as Cyprus, Portugal, and Malta have successfully adopted the UK’s non-dom laws, attracting talent by offering favorable conditions. Excessive taxation risks driving them away, potentially decreasing overall tax revenue,” he says.

Calls for Tax Simplification and Enhanced HMRC Skills

Phil Blackburn, Senior Tax Partner at Lubbock Fine, outlined three key improvements missing from Labour and Conservative manifestos: reinstating the Office of Tax Simplification, clarifying anti-avoidance legislation, and investing in HMRC skills.

He criticises the broad drafting of current anti-avoidance rules, which often entrap innocent taxpayers and lead to unnecessary investigations. He called for clearer legislation to prevent such issues and reduce wasted resources.

“The OTS did excellent work in helping to make tax in the UK easier to understand. A system that’s easier to understand is a fairer and cheaper system to deal with for everyone,” he says.

Blackburn also emphasises the need for better investment in HMRC staff qualifications to improve customer service and expedite the resolution of tax disputes.

“A lot of HMRC’s front-line staff struggle to deal with problems outside the most commonplace. That means too many issues end up dragging on for months and even years, costing both taxpayers and HMRC itself money,” he says.

Supercharging Innovation Through R&D Tax Relief

ForrestBrown, a specialist in R&D tax advice, presented a detailed wish list for the next government to optimise R&D tax relief and drive business innovation. Despite recent efforts to streamline R&D tax relief schemes, ForrestBrown identified several areas needing further improvement.

Their recommendations included setting a clear R&D expenditure target as a percentage of GDP, ensuring adequate HMRC funding for compliance efforts, and improving data transparency from the Office for National Statistics.

Sara Brigden, Managing Director at ForrestBrown, emphasises the importance of a sectorally diverse expert advisory panel, regular updates to guidance, and a thorough evaluation of SME R&D relief.

“With major political parties doubling down on R&D in their manifestos, the steps we have outlined would enable whoever wins the election to put these commitments into action. By increasing transparency, improving standards and setting clear targets, the new government has the opportunity to supercharge business innovation,” she says.

As voters head to the polls, the calls for greater transparency, balanced tax policies, and support for innovation are louder than ever. The next government faces the challenge of addressing these critical issues to ensure a fair, efficient, and growth-oriented tax system that benefits all stakeholders.

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