Welcome to the July 2014 Newsletter from Easterbrook Eaton Limited
'Nothing is certain except death and taxes' the saying goes (usually attributed to Benjamin Franklin), but that truism doesn't deter optimists from regularly calling for the taxes to be abolished...
Corporation tax, CGT, IHT or stamp duty - which taxes would you like to see abolished?
In the last month there have been several high-profile demands for radical reform of the tax system. This week a group of backbench Conservative MPs urged the Chancellor to transform stamp duty and inheritance tax, with Nick De Bois MP and Dominic Raab MP calling for a manifesto commitment to raise the inheritance tax threshold and to scrap stamp duty on properties sold for less than £500,000.
This was following a report by the Telegraph suggesting that there will be 'more tax on savers than sinners' within the next two years. The newspaper's analysis of official Treasury projections claimed that by the end of the 2015/16 financial year, revenues from inheritance tax, stamp duty land tax and stamp duty on shares are projected to raise £21.9bn. That compares to £21bn raised through so-called 'sin taxes', including tobacco, wine, beer and cider duties.
Graham Brady, chairman of the 1922 Committee of Tory MPs, said: "Inheritance tax was designed as a tax for the rich, and is now paid by many middle-income families who have accumulated assets - usually their homes - paid for out of income that has already been taxed. I hope the next Conservative government will be in a position to change this." (In their 2010 election manifesto the Conservatives did pledge to raise the inheritance tax threshold to £1 million, but the policy was left out of the Coalition agreement.)
Meanwhile, the advertising magnate Lord Saatchi has argued that corporation tax and capital gains tax should be abolished for businesses with fewer than 50 employees.
In a report for the Centre for Policy Studies he observed that 90% of UK businesses have fewer than 50 employees, with the average firm having just five staff members. Removing corporation tax for these businesses and capital gains tax for their investors would, he suggested, increase GDP up to 3.1% inside five years, compared to official forecasts of a 2.4% increase. In addition, public sector net borrowing would drop by £2.8bn in 2018/19, compared to the Office for Budget Responsibility's prediction of a £1.1bn fall.
Around £43.8bn was raised through corporation tax in 2011/12, of which small companies on the small profits rate contributed just £8bn.
Businesses respond to Queen's Speech legislation
June saw the Coalition's final Queen's Speech before next year's General Election, and although it was dismissed as 'more of the same' by Labour, there were some noteworthy elements.
First and foremost was the Pension Tax Bill, which legislates for the radical overhaul of the pensions system, as trailed in the March Budget. New rules will allow individuals to withdraw cash from their retirement funds without having to buy an annuity. Separate legislation will allow workers to contribute to Dutch-style collective pension schemes shared with their co-workers.
The new Small Business, Enterprise and Employment Bill contained measures aimed at creating a 'fairer marketplace' for small businesses. These include new laws governing late payment, access to finance, regulation and procurement. The Federation of Small Businesses (FSB) described the bill as 'a significant piece of legislation that is, for the first time, specifically designed to address the needs of small businesses'.
Previously announced plans to offer working parents with children under the age of 12 a state-funded tax-free childcare subsidy worth up to £2,000 a year were also confirmed under the Childcare Payments Bill.
Speaking generally on the Speech, British Chambers of Commerce (BCC) director, John Longworth, said: 'Businesses across Britain will be relieved to see that the Government has opted for a streamlined legislative programme, meaning ministers can devote more time to delivering the best possible environment for economic growth and enterprise'.
FSB National Chairman, John Allan, said: 'It included measures that we have pushed for in our discussions with Government and indeed all political parties over the last twelve months to help them support their growth ambitions - such as action on late payment terms for smaller suppliers and to beef up scrutiny of unnecessary regulation'.
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There is a host of information and useful features available on our website, including handy tax and financial calculators. However, remember that there is no substitute for professional, one-to-one advice. Make sure you contact us to discuss any issues for you or your business.