Boris Johnson’s successor must make support for SMEs an “immediate priority”

Britain’s next prime minister must prioritize lower VAT and corporation tax to support SMEs and set the stage for an economic recovery, according to Praveen Gupta, national tax manager at Azets.

Referring to the ongoing Conservative Party leadership race following Boris Johnson’s resignation in July, Gupta argued that the next prime minister must “be bold” and act quickly to support British businesses despite the inherent economic risks.

“The new prime minister is in an unenviable position and the government bill is likely to be steep,” he said. “There is a risk of increasing inflation but for many companies at breaking point, it’s now or never.”

According to Gupta, the biggest saving for businesses would be a reduction in the overall VAT rate to 15%.

He also called for a temporary relaxation of the VAT on energy and to push back the planned increase in corporate tax to 2024.

“This is an opportunity for the government to be bold and deliver on its promise to support UK businesses,” he added.

Only two of the original eight candidates now remain in the running to become the next leader of the Conservative Party: former Chancellor Rishi Sunak and Foreign Secretary Liz Truss.

Economic policy emerged as an important dividing line between the two, with Truss promising immediate tax cuts to help tackle the cost of living crisis, while Sunak called it “heartwarming fairy tales”. arguing that tax cuts would simply increase the national debt and pose a risk of inflation for generations to come.

Tax cuts ‘too attractive to reject’

While acknowledging the merits of both positions, Adrian Young, tax partner at consultancy Hurst, argued that the Foreign Secretary’s ‘quick wins’ have a better chance of attracting business and therefore members. conservatives.

“The business leaders I talk to are almost unanimous that taxes are currently too high,” he said, noting that recent payroll tax increases and the planned increase in corporate tax companies have been particularly painful.

As part of Boris Johnson‘s welfare plan, in April 2022 UK National Insurance contributions were cut from 12% to 13.5% – a move that is expected to bring in around £12billion.

Additionally, the UK corporation tax rate is expected to rise from 19% to 25% in April 2023.

“This is a perilous time for businesses and their ability to invest and create jobs. As the race to number 10 heats up, the expectation of impending tax cuts for individuals and businesses, and the economic stimulus they will create, will likely be too enticing to discount,” Young added.

But for Charlotte Sallabank, tax partner at law firm Katten, many of Truss’ promises are more indicative of a “desperate” desire for votes than measured fiscal policy.

“Rishi Sunak’s proposals were, for the most part, written less hastily and at a time when he was chancellor, so are more credible as fiscal policy.”

Sallabank also notes that while Truss wants to keep corporation tax unchanged, the planned increase is not “a significant deterrent to business investment in the UK”.

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Edward L. Robinett