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UK Policy Changes 'To Cost Businesses GBP9bn'

by Robert Lee, Tax-News.com, London

19 February 2016


The Confederation of British Industry (CBI) has warned that inaction on business rates, together with recent Government policy changes, including the Apprenticeship Levy and National Living Wage, will cost UK businesses GBP9bn (USD12.9bn) a year by 2020-21.

Publishing the CBI's pre-Budget submission, Carolyn Fairbairn, CBI Director-General, said: "The UK needs to be able to grow its way out of the deficit, but the danger of this rising policy burden is that it holds back businesses, particularly smaller firms. This cost burden has now crept up, if the Government is serious about supporting the UK's companies to drive growth in the economy."

The Apprenticeship Levy will be charged at 0.5 percent of an employer's payroll bill. Every employer will receive a GBP15,000 allowance to offset the levy, and businesses with paybills of less than GBP3m will not pay the levy. The Chancellor, George Osborne, expects the levy to raise GBP3bn a year, which will be used to fund three million apprenticeships.

The CBI said that the Government should work with businesses to give the Apprenticeship Levy system the best chance of long-term success. It added that revenue from the levy should be used solely to fund apprenticeships, to ensure that the new Institute for Apprenticeships is credible and enable the system "to flex for business needs by sector and commitment to training."

Turning to the CBI's priorities for the upcoming Budget, Fairbairn said that "businesses want to see the Government updating the UK's business rates system, supporting investment through the capital allowance system and equipping our world-class innovators with the tools they need to compete globally."

The CBI recommended that the Government improve the business rates system by switching the uprating of the tax rate (the multiplier) from the Retail Price Index to the Consumer Price Index, and taking the smallest businesses out of the system altogether. It would also like to see the capital allowances system reformed through the introduction of an allowance for new investments in structures and associated buildings and changes to the Enhanced Capital Allowances for energy efficiency.

The CBI has called on the Government to allow small companies that currently fall below the thresholds for quarterly payments of corporation tax to claim the benefits of research and development (R&D) tax credits throughout the year, rather than at the end of their accounting period. It should consider a payroll incentive to help small firms with the costs of hiring high-skilled staff, and an incentive for savers to invest long-term capital in scale-up companies, it added.

Finally, the CBI expressed concerns about repeated changes to pensions taxation. Fairbairn said the Government should "stick with the current system, which ensures that employers are able to do more than businesses in many countries in Europe. Any reduction in the role of the employer would only create greater fiscal pressure on the Government in the long run." The CBI argued that the Government should maintain the upfront National Insurance contribution tax relief on pensions and the marginal rate relief for middle-earners.

TAGS: tax | investment | business | pensions | energy | training | accounting | corporation tax | United Kingdom | payroll | tax credits | trade association | trade | research and development | Europe

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