One of the ambitions the government has set out in its little-known ‘Plan for Growth' is to create the most competitive tax system in the G20. This is a laudable aim.
And though the government does emphasise its bold cuts to the headline corporate rate as being the centrepiece of meeting this ambition, we now from references in other tax consultations (e.g. on the R&D tax credit) that the government recognises there is more to competitive tax policy than cutting one tax.
This year, we are going through a process of refreshing our tax policy positions after a successful 2011 campaigning year (we pushed for the lengthening of the short-life asset definition for capital allowances to eight years and for the R&D tax credit to be payable ‘above-the-line').
When thinking about the UK corporate tax environment, we've found it useful to think about the tax system in terms of how it confronts different groups of companies.
At the moment we're dividing companies up as follows:
• Start-ups;• Fast-growing SMEs;• Mid-sized businesses looking to go public; and• Multinationals.
These companies face similar growth challenges related to their point in the growth cycle and likely also have similar issues with the tax system – whether that means the tax system is creating an undue burden for them or not supporting them sufficiently.
So I just thought I might list out some of the issues we think are important to creating the most competitive tax system in the G20 from the perspective of these different groups to signal the sorts of issues we'll be looking into over the year.
• Tax incentives for investors to provide start-ups with finance, like the new Seed Enterprise Investment Scheme• The relevance of incentives to encourage corporate investors to invest in small companies, like the discounted corporate venturing scheme.
• The administrative difficulties companies have coping with VAT requirements and NICs/PAYE.• Allowing more companies to account for their corporate tax liability on a cash basis, as the government has just started for businesses with annual turnover up to £77,000.
Mid-sized businesses looking to go public
• Capital allowances and how they encourage investment.• The challenges larger mid-sized businesses have complying with the government's controlled foreign company regime.
• The definitions of expenditure used for the R&D tax credit• How companies can make best use of the government's new ‘patent box'.
These are the sorts of issues we think need to be addressed in the UK if we are truly going to have the most competitive tax system in the G20. As our tax work progresses we'll be sharpening up our recommendations for the government on tax if it's going to meet its Plan for Growth ambition.