Business Bosses Call for Tax Certainty from UK Government

Business leaders want certainty on any business tax changes from the new UK Labour government, according to a new BDO survey.

When asked what they wanted to see from the new UK government, 70% of UK C-suite respondents to BDO’s survey said they wanted more certainty over business taxes – split equally between a complete freeze on any new business taxes (35%) or a business tax roadmap for the next five years (also 35%).

Chancellor Rachel Reeves is already facing questions as to whether she will hike capital gains tax in her first Budget this autumn.

In June, both Labour and the Conservatives were accused of engaging in a “conspiracy of silence” by the Institute of Fiscal Studies around the tax rises or spending cuts that would be required to fill what the Government is calling the £20bn black hole in its finances. 

However, nearly one third of business chiefs (29%) are braced for Labour to put up corporation tax within the next five years – despite the Government committing to cap the rate of corporation tax at 25% for the duration of this Parliament. 

The headline rate of corporation tax was increased to 25% from 19% in April 2023, although a small profits rate of 19% was also introduced at this time for companies with profits of £50,000 or less.

Trump may cut corporation tax… again

By comparison, US presidential hopeful Donald Trump told American CEOs last month that, if elected, he would consider cutting the 21% US corporation tax rate even further, after cutting it from 35% in 2017, according to the Financial Times. About 100 US business leaders attended the event, including Apple’s Tim Cook, Bank of America’s Brian Moynihan and JPMorgan Chase boss Jamie Dimon.

The global average corporation tax rate is 23% although there are wide discrepancies, even between major countries: Switzerland, for example, only has an 11% corporate tax rate, while the United Arab Emirates only charges 9%, as does Hungary.

By comparison, corporation tax can go as high as 38% in Puerto Rico and even 50% in the East African island of Comoros.

After corporation tax, UK C-suite respondents said they were most likely to expect increases in energy profits or electricity generator levies (27%) and environmental taxes (26%).

Both are borne out by the Labour’s pledge to extend the sunset clause in the Energy Profits Levy until the end of this Parliament and increase the rate of the levy by three percentage points. In addition, Labour’s manifesto reiterated the party’s support for the introduction of a UK Carbon Border Adjustment Mechanism, due to be introduced by 2027.

Braced for sales tax hike

And almost one in five (18%) of C-suite executives said they expected VAT to rise over the next five years - despite assurances from the major parties in the lead-up to the election. The current standard rate is 20%.

Paul Falvey, BDO tax partner, said: “Businesses are acutely aware of the challenges facing the public finances and appear to be sceptical about the pre-election tax pledges. 

“Given the repeated changes to tax rates during the previous administration, businesses desperately want a return to some kind of stability and certainty. Many will be hoping the promised business tax roadmap will help deliver some much-needed long-term visibility to help them plan for the future with confidence.”

BDO surveyed 500 C-suite executives of mid-market businesses with between £10m-£300m in revenue for its survey, which was conducted between 18 June and 1 July 2024. 

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