First bounce back loan fraudster jailed
The director of a Manchester pizza takeaway who fraudulently claimed a £20,000 bounce back loan has been jailed for two years
Abdulrazag Zagroba, 54, from Manchester, appeared at Manchester Crown Court on Friday 24 June 2022 where he was sentenced to 24 months before Recorder Hudson.
This was the first successful criminal prosecution of a bounce bank loan fraudster for the Insolvency Service, which also saw Zagroba disqualified from acting as a director for seven years. Until now the only penalty for abuse of bounce back loans has been director bans.
The court heard that Zagroba was sole director of Amigo Pizza (Manchester) Ltd, incorporated in January 2020. The company operated a pizza takeaway business in the Stretford area of Manchester until it was dissolved in October the same year.
Zagroba’s application to dissolve the company was originally signed on 17 June 2020 but less than two weeks later, he applied for a bounce back loan of £20,000.
He did not disclose to the bank that the company was already in the process of being dissolved and he signed the loan declaration stating the company would be able to make repayments. By the time the loan was due to be repaid in June 2021, the company had already been dissolved.
The terms of the bounce back loan were clear that funds could only be used for business purposes and not personal use.
However, when interviewed under caution by Insolvency Service investigators, Zagroba admitted to having no intention of using the bounce back loan for the business.
Zagroba claimed that he arranged for friends to travel with around £14,000 in cash to give to his family abroad. He used the remaining £6,000 to buy a car and insurance.
He pleaded guilty to charges of fraudulently claiming Covid-19 financial support to which he was not entitled contrary to the Companies Act 2006 and the Fraud Act 2006 at Manchester City Magistrate’s Court on 9 May.
Julie Barnes, chief investigator at the Insolvency Service said: ‘Covid loans were designed to support viable businesses during the pandemic. Abdulrazag Zagroba, however, cynically sought to exploit the covid loan scheme and by dissolving his company, he intended to frustrate any attempt by the lender from taking action to recover the outstanding loan.
‘This sentence should serve as a warning to others who engaged in this behaviour, and they should come clean and repay the money before it is too late.’
- Published in Business grants, Tax Fraud
Business expenses and tax breaks confuse self employed
One of the biggest problems for self employed taxpayers relates to confusion over allowable business expenses when completing self assessment returns
Many self-employed people experience difficulties completing self assessment returns due to ‘confusing terminology, ambiguity around allowable business expenses and uncertainty transferring figures from personal spreadsheets to HMRC’s system. These challenges resulted in a more time-consuming process and errors being made’, finds the latest HMRC commissioned research into the tax experiences of the self employed.
There was widespread consensus that the first year of self employment was by far the most challenging, with many emphasising the level of complexity and stress induced by the process of figuring out what they needed to do. This anxiety was further compounded by their fear of the potential financial repercussions of making a mistake.
The greater the number of roles and sources of income, the more taxpayers found it difficult to keep on top of their financial records, in turn impacting effective tax management.
The process of maintaining good financial records throughout the year was also challenging, presenting additional complications by increasing the difficulty of tax management.
For some self-employed customers managing cash flow was also a challenge. This difficulty was most prominent for those with irregular hybrid incomes as it was hard to predict and align the timings of their incomings and outgoings, exacerbated when combining PAYE and self-employed earnings.
Agents and accountants were mostly employed to help overcome tax management rather than financial management challenges; for example, to accurately complete self assessment returns.
Using a tax agent was also felt to provide the added benefit of saving time, particularly for those who were time-poor, and saving money, for example, by receiving guidance on the allowable expenses they could claim for.
The ‘payments on account’ process also made planning for tax payments more challenging. This stemmed from HMRC’s system of calculating tax bills based on taxpayers’ income from the previous year and ‘payment on account’ for the year ahead.
The process of planning tax payments based on this system was particularly challenging for those with irregular incomes that fluctuated significantly from year to year.
One respondent said: ‘Because my income can fluctuate, it can be quite frustrating to end up paying loads on account when you know for a fact that you’ve not earned as much. It makes it hard to plan around.’
Many self employed people experienced difficulties completing their self assessment ‘due to ambiguity around allowable business expenses, confusing terminology and uncertainty transferring figures from personal spreadsheets to HMRC’s system’. These challenges resulted in a more time-consuming process and errors being made.
Completing self assessment was seen as challenging across the range of tax and income complexity due to uncertainty around how to complete some parts of the forms. While it was said to have improved over time, the terminology within the return was still not felt to be intuitive and simple to understand due to the use of ‘jargon’ and acronyms.
As a result, some people found it difficult to understand the questions and to know which boxes to tick and where to input information. This issue was said to be compounded by the frequency of changes to the return, with these updates adding to their uncertainty each year and requiring time to process and understand.
Some also voiced frustration about the complexity of the ID number and process of retrieving this and inputting it into the Government Gateway. This was seen as a ‘convoluted system’ and was especially frustrating if the code was input incorrectly locking users out of the system.
Long-standing self-employed workers frequently stated that the tone in HMRC communications had generally improved and was more personable, which made completing the self assessment process less stressful.
Respondents suggested a number of ways for HMRC to improve their services, including helping them track their finances and plan for tax payment, for example, through real-time self assessment inputs, improving the speed and accuracy of completing returns, for example, through downloadable spreadsheets, and providing more personal and tailored support, for example, for those in their first year of self-employment.
- Published in HMRC, Self Assessment
Industry calls for business and tax support package
Manufacturers are calling for an emergency, pre-recess package of business support measures including extension of temporary tax reliefs to support companies from escalating costs
The call comes on the back of the Make UK/BDO Q2 Manufacturing Outlook survey which shows growth and orders slowing significantly, exports almost at a standstill and, investment falling as companies cut or postpone their plans in order to maintain cashflow.
According to Make UK, the seriousness of the situation and, the prospects for the next six months, means that industry cannot wait for the promised help in the autumn which the Chancellor made in the Spring Statement. It is calling for urgent actions before MPs go on their summer break.
Make UK has made a number of recommendations for measures government can introduce now to address rising business costs including the following:
- waive or reduce business rates for the next 12 months;
- implement VAT deferrals for larger businesses and waive completely for SMEs;
- temporarily freeze the Climate Change Levy and, if energy costs continue to rise, remove it completely;
- Review the efficacy of the business interruption loan schemes introduced during the pandemic and deploy a successor scheme by Q3;
- Extend the 130% super-deduction tax break, due to end in March 2023; and
- make the increase in the Annual Investment Allowance permanent.
In addition to immediate measures, Make UK also stressed that the government must move away from short-term, gesture politics. Instead, it must focus on demonstrating to business and, foreign investors, that it has the capacity to operate in a serious manner with a long-term strategy.
Stephen Phipson, chief executive of Make UK, said: ‘Whilst industry has recovered strongly over the last year we are clearly heading for very stormy waters in the face of eyewatering costs and a difficult international environment.
‘Clearly some of the factors impacting companies are global and cannot be contained by the UK government alone. However, given the rate at which companies are burning through their balance sheets just to survive, it must take immediate measures to help shield companies from the worst impact of escalating costs and help protect jobs.’
Richard Austin, head of manufacturing at BDO, added: ‘Manufacturers have shown their ability to overcome a wave of challenges over the last couple of years to remain competitive. The question is when fatigue will overcome resilience. The tipping point where the shorter term need to retain cash outweighs investment is starting to be reached and could have significant implications for future growth.
‘Rapidly rising input costs, ballooning energy bills and in some cases inflation-busting pay settlements have hit margins and frozen investment plans. There is now a strong case for government action to help UK manufacturers weather the immediate storm and incentivise investment for long-term growth.’
According to the survey, investment intentions dropped sharply from +27% in Q1 to just +5% as companies cut or postpone their plans in response to rapidly escalating costs.
Two thirds of companies (67.8%) said rising energy costs were causing major disruption, almost three quarters (71.9%) cited increased raw material costs posing a similar threat and, two thirds (66.8%) cited rising transport costs.
Manufacturers expect to continue to increase their UK and export prices substantially in the next quarter to +69% and 63% respectively, with both these figures dwarfing previous record levels in the survey’s 30-year history.
- Published in Business grants, Business Support Finder Tool
Treasury pushes online tool to flag National Insurance cut
he Treasury has launched an online tool to show how take home pay will be affected by the upcoming changes to the National Insurance threshold from July
The tax cut represents a £6bn cut to National Insurance effective from 6 July and is worth an average £175 a year to taxpayers and will go some way towards offsetting the 1.5% increase introduced through the social care levy, which came into effect on 6 April.
The online checker will use salary information for employees who are paid through PAYE system, giving personalised estimates of how much they could save because of the government’s changes. All you have to do is enter your current salary before tax and it calculates the estimated saving depending on earnings.
The cut, which will see the point at which people start paying National Insurance rise to £12,570, is worth up to £330 and seven in 10 workers will pay less National Insurance even after accounting for the health and social care levy, the Treasury said.
From July, employees who earn £36,600 or under will pay less National Insurance. For example, a taxpayer earning average salary of £31,285 will pay £185 less over the nine-month period.
Everyone who pays National Insurance will see a tax cut, and the tool will show that employee earning up to £51,000 will see this cut more than offset the impact of the health and social care levy. This means the majority of working people will see a boost to their take home pay.
The tool estimates how much National Insurance an employee paid from July 2021 to June 2022 at the old rate and compares it with how much they will pay from July 2022 and June 2023. However, it is not suitable for every situation and does not provide a calculation of an individual’s National Insurance contributions liabilities.
Chancellor Rishi Sunak said: ‘With our historic £6bn National Insurance tax cut just weeks away, this new tool will show hard-working Brits how much more of their pay will be going directly into their pocket.
‘This tax cut, combined with £400 off energy bills and direct payments of £1,200 to eight million families, will help shield people from rising prices.’
Alongside this tool, the government has also launched a new financial support and benefits checker tool. It enables people to answer 10 simple questions to find out what support they might be eligible for by cross-checking against 25 individual benefits and support offers. This should help people find out what support they may be eligible for that they may currently not be accessing and is part of the government’s drive to help people manage the increased cost of living.
This first version of the financial support and benefits checker tool includes a selection of benefits and other sources of financial support, such as childcare support, job seeker’s allowance, budgeting loans and housing benefit. However, it does not include information about pension credits which are underclaimed by an estimated 1.3m pensioners.
A wider range of options will be included in another version in the next few months.
- Published in National Insurance
New powers introduced as HMRC targets till fraud
Three people were arrested after HM Revenue and Customs (HMRC) officers visited businesses across the country in a day of action after new powers were introduced in the fight against till fraud
Businesses involved in making, supplying or promoting electronic sales suppression (ESS) systems that help users hide or reduce the value of till sales, now face fines of up to £50,000 and criminal investigations. Users also face fines as HMRC increases efforts to target the tax evasion practice.
HMRC investigations visited 30 businesses on 18 May including shops, takeaways and restaurants, across nine counties to tackle ESS and two men and a woman were arrested in Nottinghamshire as part of a criminal investigation into the alleged supply of ESS software.
The men, aged 43 and 58, were arrested along with a 56-year-old woman on suspicion of fraud offences and cheating the revenue.
A search warrant was executed by HMRC officers at three addresses and computers, digital devices and paperwork were seized. All three suspects have been released under investigation.
Financial Secretary to the Treasury, Lucy Frazer, said the overwhelming majority of businesses are paying their taxes and rightly want to see HMRC stepping in where needed to ensure a level playing field for all.
“Tax crime does not stand still and neither do we – the new powers available to HMRC allow them to clamp down on ESS and help recover tax revenues to fund our vital public services,” she said.
Marc Gill, HMRC’s director of individuals & small-business compliance, said electronic sales suppression gives the appearance a business is trading legitimately, when in fact they’re really just stealing money from taxpayers.
“We encourage anyone using, supplying, making or promoting ESS to report via our disclosure facility. Making a disclosure is not only the right thing to do it could also lead to a reduction in financial penalties,” he said.
ESS users will either have access to specialist software or will configure their electronic point of sale (EPOS) device in a specific way that allows them to consciously hide true sales and the resulting tax that is due.
Sales processed through the till give the impression they have been recorded as normal, however the end-of-day report is deliberately manipulated behind the scenes to reduce reported takings.
As part of investigations into ESS HMRC can also recover tax evaded and launch investigations that could result in criminal convictions.
HMRC has a voluntary disclosure facility and would encourage anyone using, making, supplying or promoting ESS to contact them. By making a disclosure now those using or benefiting from ESS could see their financial penalties reduced.
Homeowners warned over bogus stamp duty refunds
New homeowners are being warned about cold calls from rogue tax repayment agents advising them to make speculative stamp duty land tax (SDLT) refund claims, which could leave them with large tax bills
The warning comes after a recent spate of stamp duty refund claims to HMRC failed to meet very specific criteria.
The agents have been known to call new property owners after finding them through Land Registry records and property search websites, promising money back on ‘unknowingly overpaid’ stamp duty.
In a recent example, a letter from a rogue agent suggested a homeowner may have overpaid £60,000 worth of stamp duty. The agent claimed the home could be designated as two properties, despite it clearly being one. This is not an isolated example – other cases include:
a claim that a bedroom could be a separate dwelling and in line for claiming ‘multiple dwellings relief’ because it had an en-suite and a built-in wardrobe which could be a kitchen if you added a microwave and a kettle;
an individual who claimed their house was not wholly residential because a paddock behind the garden was used occasionally to keep a neighbour’s horse. The agent advised that they were due lower stamp duty rates because the presence of the paddock made the transaction a mix of residential and non-residential property, which would incur a lower stamp duty payment; and
a new owner of a six-bedroom house claimed it was not a wholly residential property because a room above a detached garage was used as an office.
Recent analysis undertaken by HMRC suggests that up to a third of claims for multiple dwelling relief refunds were incorrect.
HMRC raises enquiries on these claims, but sometimes that is after the agent has taken their fee, leaving the homeowner to pick up the difference. Incorrect refund claims must be repaid with interest, with some potentially facing penalties as well.
HMRC collected £11.6bn in SDLT in 2019 to 2020 and this is set to rise as average UK house prices continue to soar after the pandemic. The average UK house price was £277,000 in February 2022, which is £27,000 higher than this time last year. This figure is £530,000 in London.
Nicole Newbury, HMRC director for wealthy and mid-sized business, said: ‘We are seeing obviously spurious refund claims that are never going to succeed; but will lead to an unnecessary bill for the customer.
‘So we are warning new homeowners not to get caught out by tax repayment agents promising easy money on a ‘no win, no fee’ basis. If it sounds too good to be true, it probably is. We want to help people get it right and avoid unnecessary tax bills, so treat promises of easy money with real caution.’
Anyone approached about a stamp duty refund claim should check with their original conveyancer, take independent professional advice and check HMRC’s guidance by searching ‘stamp duty land tax’ on gov.uk or contact the HMRC helpline on 0300 2003 510.
- Published in Stamp Duty
More support for energy customers as loan becomes £400 grant
In a bid to tackle the cost of living crisis, the Chancellor has announced a £15bn package of support with one-off payments for pensioners and lowest income earners, and doubled the £200 energy bill support
The measures will see one-off payments of £650 for low income earners, £300 for pensioners and a further £150 for disabled people.
Stressing that the energy crisis was affecting the majority of people in the country, he also changed the £200 loan for electricity bills, doubling it to £400 and removing the requirement to pay it back.
Chancellor Rishi Sunak said: ‘To help with the cost of living we are going to provide significant targeted help to those with the lowest incomes, pensioners and the disabled. We will send directly to eight million of lowest income households a one-off payment of £650. The DWP will make the payment in two lump sums, in July and later in the year, and HMRC will make payments to those on tax credits.
‘There is no need for people to fill out complicated forms or bureaucracy – we will send the payment straight into their bank accounts.’
The package also includes support for pensioners and disabled people.
‘From the autumn, we will send over eight million pensioner households who receive the winter fuel payment – an extra, one-off pensioner cost of living payment of £300,’ the Chancellor said.
‘Disabled people also face extra costs in their day-to-day lives – like having energy-intensive equipment around the home or workplace.
‘So, to help the six million people who receive non-means tested disability benefits, we will send them, from September an extra, one-off disability cost of living payment, worth £150.
‘Many disabled people will also receive the payment of £650 I have already announced, taking their total cost of living payments to £800.
‘The most vulnerable will receive support of £1,250.’
The Chancellor also confirmed that benefit payments will rise in line with the September 2022 CPI figure for payments starting in April 2023. In addition, the triple lock will apply to state pensions.
Recognising the extent of the cost of living crisis, the £200 loan for electricity users becomes a grant, and the amount will be doubled to £400 from October.
‘The plan was to provide all households with £200 to help with bills, which was repayable. This support is now unambiguously a grant and the support will be doubled to £400 and not a penny to repay,’ he said.
Energy suppliers will deliver this support to households with a domestic electricity meter over six months from October. Direct debit and credit customers will have the money credited to their account, while customers with pre-payment meters will have the money applied to their meter or paid via a voucher.
This support will apply directly for households in England, Scotland, and Wales. It is GB-wide and there will be equivalent support for people in Northern Ireland.
‘We are raising emergency funds to help millions of the most vulnerable families who are struggling right now,’ the Chancellor said. ‘And all households will benefit from universal support for energy bills of £400 – with not a penny to repay.
‘In total, the measures I’ve announced today provide support worth £15bn.
‘Combined with the plans we’ve already announced…that means we are supporting families with the cost of living to the tune of £37bn or 1.5% of GDP. That’s higher or similar to countries like France, Germany, and Italy.’
Robert Pullen, a partner at Blick Rothenberg, said: ‘After weeks of denials, delay and dithering, the government finally announced a spate of cost-of-living support measures today, ranging from giveaways of £650 per household to converting the previously announced discount on energy bills from a loan to a grant.
‘The total cost of all the measures announced this year is now estimated by HM Treasury to be £37bn, which is equal to the total income tax paid through self-assessment tax returns for 2021/22.
‘Rishi also appears to have learnt from the calamitous administration problems created with previous measures, as we are told the process and paperwork will be far simpler.
‘However, the devil is in the detail and it is possible that many other individuals could miss out on support entirely or receive very little.
‘Whether Rishi will announce further support, or changes to the tax system more widely such as a speculated reduction in the income tax rate or increases to the long frozen basic rate band, which is being severely eroded by inflation, remains to be seen.’
Nigel Morris, employment tax director at MHA, said: ‘While the government has lived up to their promise of evolving their response to the cost of living crisis, as demonstrated by a windfall tax on energy companies and the UK’s energy bill grant doubling to £400, a more rapid rethink on taxes and businesses incentives is urgently required to prevent an impending recession.
‘Reducing the standard National Insurance contribution (NIC) rate back to 12% and lowering the income tax rate from 20% to 19%, even if only temporarily, would provide some much-needed relief for businesses and families across the UK. As demonstrated by the temporary VAT cut from 17.5% to 15% to tackle the 2008 financial crisis, short-term solutions can be highly effective to introduce vital relief and should be considered in the current climate.’
- Published in Uncategorized
Scam warning for tax credits claimants
In the run-up to the 31 July renewals deadline for tax credits, HMRC has warned that fraudsters are targeting claimants with scam emails, fake websites, and text messages
The warning comes as in the 12 months to April 2022, HMRC dealt with nearly 277,000 referrals of suspicious contact received from the public.
However, this is significantly less than the 1,154,300 referrals that HMRC received in the lead up to April 2021 and was ‘likely due’ to the higher prevalence of the Covid-19 support schemes.
The tax authority expects around 2.1m tax credits users to renew their annual claims by 31 July 2022 and has issued the warning to remind people about the tactics used by criminals who mimic government messages to make them appear authentic.
The tax authority has also restated that it does not charge tax credits users to renew their annual claims and is urging users to be alert to misleading websites or adverts designed to make them pay for government services that should be free, often charging for a connection to HMRC phone helplines.
HMRC also reiterated that they will not call anyone ‘out of the blue’ as fraudsters use phone calls, text messages and emails to try and dupe individuals, often trying to rush them to make decisions.
The typical style that the scammers use to imitate HMRC includes making phone calls threatening arrest if people do not immediately pay a fictitious tax bill owed or claiming that the victim’s national insurance number has been used fraudulently.
Scammers will also use emails or texts to offer fake tax rebates or Covid-19 grants, they may also claim that a direct debit payment has failed.
HMRC’s cyber security operation team identifies and closes down scams every day. The department has pioneered the use in government of technical controls to stop its helpline numbers being spoofed, so that fraudsters can no longer make it appear that they are calling from those HMRC numbers.
Myrtle Lloyd, director general for customer services, HMRC said: ‘We are urging all of our customers to be really careful if they are contacted out of the blue by someone asking for money or bank details.
‘There are a lot of scams out there where fraudsters are calling, texting, or emailing customers claiming to be from HMRC. If you have any doubts, we suggest you do not reply directly, and contact us straight away. Search gov.uk for our ‘scams checklist’ and to find out how to report tax scams’.
- Published in Tax Credits, Tax Fraud
How to price in wage increases and protect profits
With the cost of living crisis, businesses need to focus on retaining staff and factoring pay increases into overall profitability, explains Stuart Clark, managing director of accountancy firm Russell & Russell
These are hard times all round. Particularly for the generations who have never experienced the inflationary chaos late last century, when interest rates hit 17% and mortgage payments soaked up the bulk of salaries.
That said, it is bad enough now, despite median pay awards to January standing at 3%, their highest for a decade. Employees are being attacked on all fronts, with soaring home energy bills, skyrocketing petrol prices, and startling increases in food – up 13% on average over the past year – and public transport costs.
It is inevitable in this series of financial blows that many employees will turn to their employers to help them weather the storm. And employers who are keen to keep their teams intact will be asking themselves: how can I further increase rewards without damaging the business?
The answer, as in so many otherwise intractable business scenarios, is to know the numbers, analyse them and use them as a clearly signposted pathway towards well-informed decisions.
In practice
The first step in considering remuneration policy is to discern what percentage salaries are of the direct cost of sales, and what the effect on the business would be if that percentage were to go up.
Take, for example, a business with a £3m turnover, gross profit of 30% and a net profit of 10% (£300,000).
An across-the-board increase in direct costs of 6.25% – which may consist of increased wages (and the increased employer contributions on this increased salary) and the increased employer National Insurance contributions (NIC) (up 1.25% this year) as well as any other direct material increases – would mean that the firm would have to increase sales by over £500,000 (ie, over 17% to £3.5m) in order to maintain the same levels of net profit (£300,000).
Or it could increase prices by 4%.
On paper it’s a no-brainer. Yes, a hike in prices might lose some custom, but clients are much more accepting of small increases in the current climate – and, with an 8% increase the firm could even afford to lose some customers and still make the same, or more, net profit. More money for less work.
The trouble is that many companies and organisations don’t look at the situation in this light and assume that they can realistically cover the costs of wage increases by the simple expedient of going out and winning more business. That is an unnecessarily hard hill to climb.
Businesses with strong teams and productive individual workers will obviously want to strain every sinew to retain them. Apart from the disruption inherent in frequent staff turnover, the recruitment costs to replace them are significant, with research suggesting an average of £11,000 per employee.
But there are other ways to encourage loyalty and good staff retention rates, such as offering interest-free loans – up to £10,000 is permitted at the moment – to be offset against future wages. This can help employees with, for instance, expensive season travel ticket costs.
Employee Assistance Programmes can also help to make people feel valued and wanted by supporting them with advice on areas such as financial planning and debt management, and perhaps counselling for staff who are struggling to make ends meet. In these trying times, many firms are also offering mental health support.
Bonus schemes
Bonus schemes are a double-edged sword. While they may be initially welcomed by employees, experience suggests that some staff may quickly feel entitled to them and expect the extra payment simply for doing their job – and become disincentivised if the bonus is withdrawn.
The simplest solution to staff satisfaction is to strive wherever possible to pay the market rate and, if practicable, something over and above.
And, while remaining sensitive to the inflation-fuelled trials that employees face, as well as the 1.25% increase in employers’ NICs, it is not unreasonable for employers to make the case in the workplace that they, too, are under the cosh from unprecedented increases in materials costs, business rates, living wage demands, premises and transport costs, and other margin-eroding pressures.
Responsible employees will take this into account and may be persuaded to exercise restraint if offered a more structured and advanced personal development plan, or a healthier work-life balance. A 2018 study said that 92% of employees felt benefits have a positive impact on overall job satisfaction.
None of these issues are going away anytime soon. UK inflation is at a 30-year high of 9% and may yet go higher.
But employers who are asking themselves if they can afford to lend a helping hand through wage increases should perhaps, more pertinently, be asking themselves if they can afford not to.
- Published in Uncategorized
Sunak promises tax cuts for businesses
n a speech to the Confederation of British Industry (CBI) the Chancellor has promised tax cuts for businesses in the Autumn Budget
The promise, made at the CBI’s annual dinner, was made with the aim to boost investment ahead of the increase in corporation tax from 19% to 25% from April 2023 for company profits over £250,000.
Speaking at The Brewery in Central London the Chancellor stated that in order to get the tax cuts, businesses needed to ‘invest more, train more and innovate more’ as these were areas which Sunak highlighted as the UK’s ‘weaknesses. He added that this was ‘at the centre’ of his economic outlook.
The Chancellor said: ‘In the Autumn Budget we will cut your taxes to encourage you to do all those things. That is the path to higher productivity, higher living standards, and a more prosperous and secure future.’
Sunak mentioned the temporary 50% cut to business rates during the pandemic however added that ‘of course, there’s more to do’. The Chancellor used the speech to thank the CBI for their support during the Covid-19 pandemic and to reassure the CBI of the government’s pro-business history, stating ‘never, ever doubt we are on your side’.
In the Budget last year Sunak said he would increase the UK’s corporation tax from 19% to 25%, which aims to raise around £17bn annually. Small companies will continue to pay the lower 19% rate.
At the same time, the Chancellor also introduced a temporary ‘super-deduction’ for two years which offered a 130% relief on the purchase of equipment which is equivalent to 25p off a company’s tax bill. The move was done to encourage businesses to invest sooner.
The CBI has previously warned about the impact of ending the scheme, stating that capital investment will fall in 2023 as corporation tax rises at the same time. It stated that this will ‘likely send business investment as a share of gross domestic product to the lowest level in the G7’.
In response to the Chancellor’s speech, CBI president Lord Karan Bilimoria also spoke and urged the government to ‘act immediately’ on the cost of living crisis, stating that he is worried by the current trajectory as it will bring businesses ‘the highest tax burden in 70 years’ and ‘will stifle our recovery and growth’.
Bilimoria also urged the Chancellor to help companies to invest by introducing a permanent successor scheme to the super deduction, which he described as a ‘stroke of genius by the Chancellor’ and ‘of the utmost importance’.
He also called on the government to extend a recovery loan scheme to help businesses access finance and eventually create a long-term replacement, and bring forward a UK digital strategy.
The Chancellor closed his speech by stating that the government’s ‘firm plan is to reduce and reform’ business taxes but that businesses needed to their bit too.
Sunak said: ‘I believe our most exciting companies are still to be founded, our most talented people are still to be taught, and our best ideas are still to be discovered.’
- Published in Uncategorized