UK Government Under Fire Over Corporate Tax Reforms

by Jason Gorringe, Tax-News.com, London

11 November 2003

The UK government’s plan to simplify the corporate tax regime through a programme of reforms could backfire on the Treasury and make the system more complex, the Institute of Fiscal Studies has warned, according to a Financial Times report at the weekend.

"The signals are at best confusing and risk undermining business confidence in the government's commitment to its objective of maintaining a competitive corporate tax system," Stephen Bond, economist at the IFS explained, according to the FT.

The Institute has also criticised the government’s proposals in the sphere of lease duties, which it argues would increase cost burdens on business. Under current rules, lease duties on rents are based on the length of the lease and the average annual rent. However, the new system will be based on the net present value of the total rent payable, a move also criticised by the CBI, which has claimed that some firms could pay up to eight times more in lease duty under the regime.

"The majority of business premises are leased and duty increases on this scale will be damaging. This tax hike could easily swing the balance against marginal projects, undermining regeneration and costing jobs”, CBI Director-General Digby Jones said last month.

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