Gordon Brown Warned Over Increased Compliance Costs For Corporations

by Caroline Maxwell, Tax-News.com, London

22 October 2002

Leading accountancy firm, BDO Stoy Hayward has warned that the UK government's corporate tax reform plans could end up costing British businesses millions of pounds, and may force larger organisations to relocate overseas.

Speaking to the Guardian newspaper on Monday, Adam Frais, tax partner with BDO explained that although the proposals are ultimately intended to simplify the tax regime for corporations, businesses will likely face increased compliance costs during the transition phase: 'when many companies will be forced to shoulder the administrative burden and cost of keeping two sets of accounts - one under the old regime and the other under the new.'

He added that: 'Any hint of further complexity in the short term will not only damage productivity of small and medium sized firms but could also force large companies to consider taking their investment abroad.'

Meanwhile, economic think-tank, the Ernst & Young Item Club has warned that an estimated £7 billion budget 'black hole' means that there is a 50% probability that Chancellor Gordon Brown will need to increase taxes again if he is to avoid breaking his 'golden rule'.

Speaking to the BBC yesterday, Professor Peter Spencer, Item's economic adviser, explained the implications of this:

'His golden rule allows him to borrow to finance investment - that's schools and hospitals. It unfortunately doesn't allow him to borrow to finance the teachers, doctors and nurses - i.e. current expenditure - and it's because he is so close to breaking the golden rule that he will have to put taxes up, perhaps not in April but at some point over the next couple of years.'

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