More than half of Britain’s medium-sized businesses expect their tax bills to rise as a result of a change in the Labor leadership, while only 13 percent believe the new regime will bring them down.
The findings come from the latest Mid-Market Tracker published by accountants and business advisory firm BDO, a monthly survey of 500 UK mid-market businesses with a turnover of between £10m and £500m.
About 54 percent of respondents said they expect corporate taxes to increase under the new leadership. Almost a third, 32%, expect it to stay at current levels until the end of Parliament, while 1% were unsure.
The figures come at a critical time, with business leaders already calling for an end to “drift and delay” as a top government change leaves firms facing another period of political uncertainty.
The survey follows the release of BDO’s Mid-Market Manifesto, which sets out a series of policy recommendations designed to drive growth across Britain’s mid-market business sector.
The numbers are huge. Despite accounting for less than one per cent of private sector businesses, the UK middle market accounts for more than a third of private sector jobs and more than 40 per cent of private sector revenue, a contribution that growing firm owners will be keenly aware of.
Chief among BDO’s recommendations is a proposal to simplify corporate tax by removing the current main rate and the marginal relief system in favor of a single rate of 21 percent, just below the EU rate of 21.6 percent.
For entrepreneurs whose profits currently run in the relief band between £50,000 and £250,000, the appeal is obvious. BDO says a simplified system can support investment by reducing uncertainty, reducing compliance burdens and giving businesses greater confidence about the tax implications of growth.
Paul Townson, BDO tax partner, said: “It is clear that many businesses are concerned about the tax implications of a change in Labour’s leadership. This is a time when many are already struggling with both high tax and high compliance costs.
“However, the incoming administration has an opportunity to rethink how best to boost growth in the UK’s recently struggling economy.
“Currently the UK tax code is too long, too complex and needs to be simplified.
“Simplifying the federal tax system to a single rate of 21% will create costs but we believe this will be offset by the benefits from the stimulus investment and the resulting increase in tax revenue generated by supporting long-term employment.”
Taxation is not the only concern of the manifesto. BDO is also calling for measures to tackle skills shortages across sectors and regions, including securing access to training for key technical skills, more flexible training for mid-market firms and prioritizing the implementation of the government’s proposed “cleaning road” work assessment programme, proposals which build on the £725m learning reform package announced last December.
The manifesto concludes with sector-specific proposals for several growth-promoting sectors identified in the Invest 2035 Modern Industrial Strategy, where the UK has or could develop a competitive advantage: advanced manufacturing, life sciences and professional and business services.
Whether the new occupant of Number 10 listens remains to be seen. For now, business owners planning investment decisions would be wise to pencil in the fact that the tax burden is only one-sided.
