It was the Conservative Party’s turn to put on their conference this week. If you want to dig a little below the headline announcements of the scrapping of HS2’s northern leg, the new post-16 qualification, or the plan to phase out smoking, you can read Sunak’s, Hunt’s, Donelan’s, Badenoch’s, or any of the other major speeches here.
You won’t find much in the way of new policies though. Conferences are primarily about energising the base, which is why so many of the speeches look so odd to outsiders: the base of most political parties is, in the kindest possible way, a little weird.
Back in the real world, Britain’s entrepreneurs are busy working hard and paying (plentiful) taxes. Dan Neidle has crunched the numbers and can say with some confidence that UK companies will pay more tax in 2023, as a percentage of their profits, than at any time since the 1970s, and plausibly more than at any time since 1946.
Remember, corporation tax was at 52% in 1984 before being cut to 35% under the Conservatives, further reduced by Labour to 31% in 1997, 30% in 1999, and 28% in 2007. The Conservative-Liberal Democrat coalition lowered the rate further to 27% in 2010, then 24% in 2012, with the Conservatives cutting it to 20% in 2015 and 19% in 2020. Boris/Rishi hiked it back to 25%; Truss/Kwarteng reversed it; then Rishi/Hunt reversed the reversal back to 25%.
Taking the long view might suggest that businesses must be paying less. However, at the same time the tax base expanded dramatically, particularly through the abolition of the allowances. So hiking our corporate tax rates means we’ve been leapfrogged by the likes of Switzerland, Latvia, Iceland, Finland, Estonia, Sweden, Slovakia, Norway, Greece, Denmark, Turkey, Israel and Luxembourg.
Of course, there are plenty of early-stage companies that don’t pay corporation tax, and there are lower rates and reliefs for smaller companies, but in living memory the incentive to get bigger has scarcely been less appealing.
If taxes on business are to come down, whoever ends up forming the next government will need to make some tough decisions on cutting spending – not just scrapping HS2 and using the money elsewhere, but actual cuts. Or they could raise taxes elsewhere, but not through personal taxes, which are already pushing founders to offshore before exiting. Or they could deliver a laser-focused growth agenda of the sort we and others push for.
Reporting for Business
On the topic of tax, another week, another report. This time on making it simple with Intuit and Enterprise Nation. In it, we argue that HMRC needs an upgrade.
As Mark Neild, entrepreneur, academic and small business adviser, says: “Finding help on the HMRC website is difficult and generally counter-intuitive. Things are unnecessarily complicated. Why does it take two forms and several hours on the helpline to claim back overpayment of National Insurance when the surplus is clearly showing on the agent’s portal? Why does it take over £500 of admin costs to manage a £60 tax liability as trustee of my niece’s will trust? Why do I need six Government Gateways?”
Meanwhile, Susan Holmes, founder of Bluebears Allsorts, told us: “Making Tax Digital is a good thing because it’s all online. However, on Government Gateway, I don’t think enough people know how to get on it. If you have a business as well, you’ve got two identities – I think that could be clearer. It’s sometimes really difficult to get through to HMRC – it took me four hours one week.”
Susan has been undergoing cancer treatment and is on Universal Credit and ESA, so she must submit her expenditure to the government at different times, due to the payment period she is in. These do not tie in with the VAT submission dates for the business, which is like having to do it twice – once for Universal Credit and once for HMRC.
It doesn’t need to be like this. We can just copy Sweden’s whole-of-Government approach, Hungary’s support for startups and new taxpayers, and Australia’s virtual tax assistant ‘Alex’.
This is one area where spending a bit on fixing things would quickly pay off. First and foremost, we need to ensure HMRC is able to deliver a reasonable level of service for business owners. At the same time, we need to make sure that the extension of Making Tax Digital (MTD) isn’t further delayed. Second, Government Gateway needs a serious upgrade and data shared across government (the once-only principle will get this done). Third, we can and should lead the world on the use of virtual assistants and artificial intelligence.
You can read the full report here.
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