A tax expert believes that the announcement of a one-year deferred increase in a key capital tax in the upcoming budget could lead to an increase in some economic activity.
Anne Rose, head of tax at accounting firm Burgis & Bullock, does not expect immediate widespread tax increases, but an early announcement of the capital gains tax increase for 2022 could be in. government plans.
Chancellor MP Rishi Sunak will present the first budget since the start of the Covid-19 pandemic on Wednesday March 3, with numerous calls from businesses for additional business support to help recover from the pandemic.
Anne says Chancellor is in an impossible position of having to go the long way to balance the books, but also to support businesses and individuals, so announce a capital gains tax increase a year in advance could provide a windfall of tax revenue.
“It seems too early for the government to embark on a major revenue-raising campaign and it would seem strange to hit businesses with tax hikes in April, before some of them can reopen again,” she declared.
“The companies I have spoken with want to focus on supporting and growing businesses, as well as initiatives to stimulate investment, consumer spending, and activities such as capital spending.
“There is still significant speculation around the pre-budget capital gains tax and corporate tax because they were not covered by the famous triple lockdown of tax rates in this country. government. The difficulty for the Chancellor is that the blocked tax rates relate to income tax, NIC and VAT – taxes which account for nearly 65% of tax income.
“The announcement of a capital gains increase now, which will not take effect until 2022, would galvanize people to sell goods and businesses and give an immediate boost to government coffers, as people are trying to beat the rise.
“We’ve already seen individual business owners frantically trying to close sales before March because of the possibility of an immediate price increase.
“Right now, small business owners only pay 10% on the first million pounds of profit made on a divestiture, if the Chancellor were to put capital gains up to 30% without relief, then that’s is a huge difference. “
Tax specialists and advisers Burgis & Bullock has offices in Leamington Spa, Nuneaton, Rugby and Stratford upon Avon.
Anne, who has over 25 years of experience providing tax advisory services, added: “We may see an extension of the VAT reduction for hospitality and stamp duty relief on real estate sales, both of which are due to expire on March 31.
“To stimulate investment, there may be extensions to reliefs such as the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT). For income tax, and maybe even corporate tax, it’s probably too early to start recovering funds with the country entrenched in the recovery.
“There are a small number of companies that have done well with the pandemic, but a lot of companies have been negatively impacted and on top of that, they are facing the fallout from Brexit.
“By focusing on stimulating and sustaining economic recovery, it will allow more people to return to work and will have a positive long-term impact on public finances, as they can reduce state support.”
This was posted in the Member News section of Bdaily by Matt Joyce.