THE POLITICAL PARTY CONFERENCE SEASON is upon us once again. If we ignore the more frivolous activities and antics of this season – especially those relating to cleaning behind fridges – what can the politicians offer UK businesses?
In the last couple of weeks (and we still have the Conservatives to look forward to this week) we have seen the politicians falling over themselves to talk about economic recovery. A promising topic, no doubt, as we need more positive discussions about the prospects for UK plc; particularly with regard to investment, jobs, exports and ultimately growth.
Yet, rather than using their platforms as an opportunity to highlight their support for business – and wider economic – growth, they are simply out-announcing each other with a plethora of questionable new ideas, especially around tax in its broadest sense.
The Liberal Democrats for example, announced (inadvertently) that they would increase taxes on the rich – those earning over £50,000, in addition to a tiered mansion tax charge. Labour said it would reverse a planned corporation tax reduction and use this cash to fund a freeze in business rates for SMEs to 2016. And they have also announced a tax in all but name on energy companies, with a view to providing some respite to householders and businesses from energy price inflation.
Importantly, there is a deeper, more subliminal message emerging from the conference season. We seem to be witnessing an emerging view that only large and small businesses exist, with nothing in between. The Labour party quite definitely talks about helping small business and countering the perceived vested interests of larger entities. These are views reflected in what the Liberal Democrats have also said.
My concern is that this overlooks the dynamic and growth orientated entities, many of whom would be described as mid corporates. These businesses are the ones that will drive growth, being sufficiently flexible to adapt to trading conditions here and abroad. But they need support in retaining and recruiting talent, in terms of access to finance, being able to innovate, to trade overseas without profit leaking into overseas tax jurisdictions which may prevent repatriation and reinvestment.
By offering a more informed perspective from the mid-market than currently exists, our aim is to engender a greater appreciation for the segment’s tangible contribution and future potential in supporting the recovery – points which are often missed by party rhetoric but critical in the context of the wider recovery and Britain’s role in global business.
Moreover, facilitating this dialogue should go a long way in informing future tax legislation and correcting current misunderstandings around the UK’s corporate tax structure. For sure, sometimes specific breaks and incentives are required in the tax system even though the preferred model should be that of a broad base with low rates.
The measures proposed in respect of energy companies misses the broader point that businesses do not sit on cash; they use it to invest in their infrastructure or else return to shareholders – who then either seek new investments or spend it in other ways. The environment for tax planning is very confused at the moment. Those seeking to work within already complicated regimes are also having to contend with a hostile environment even around the legislation for tax breaks introduced by this coalition government, as well as the previous Labour one.
What corporates need is stability in terms of tax policy in order to make business-critical decisions, not short term sound bites aimed at generating a few headlines.
Jonathan Riley is a partner and national head of tax at Grant Thornton UK LLP
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