QCA calls on the Treasury to support growing businesses through the pandemic
The Budget is normally an opportunity to be forward looking and examine how to refine plans to achieve long-term goals. This year is undoubtedly different. Few would argue that Brexit alone would present some issues for the Chancellor, but COVID-19 is certainly an even greater concern in the short-term.
The uncertainty is an issue felt across the economy. While it is clear a budgetary rebalancing will be necessary at some point, we are still in the midst of the pandemic, and we cannot harm the recovery by prioritising raising Treasury revenues.
We have put across a view that covers both short and long-term economic concerns. We believe that supporting small and mid-sized quoted companies during and after the pandemic will boost the economic recovery, with the taxation system playing a significant role in this.
In order to improve the tax system, we propose that the Treasury focuses on making it competitive, simple and certain.
The priority for making the system more competitive should be a rebalancing of financing options. Currently, there is a cost imbalance between choosing debt and equity finance, with debt being unduly attractive as the costs of accessing debt are tax deductible, while this isn’t the case for equity. Studies have shown that highly leveraged businesses and economies are more fragile and less likely to grow, and so fixing this problem will make the UK economy more stable and prosperous.
We also argue that this Budget is an opportunity to provide support and incentives to businesses that play a role in the UK’s COVID-19 response.
Tax simplification remains a key issue for businesses and key to this is making the administrative process more straightforward. We propose that HMRC harnesses the rollout of Making Tax Digital to provide an online portal where queries can be raised and settled on both sides, across all taxes.
Finally, certainty in the tax system helps to lay a solid foundation for business decisions. Investment and growth plans are less likely in an environment where businesses and investors cannot confidently predict their tax liability and therefore their net returns. We propose that HMT introduce a bespoke binding ruling process that can consider queries on all aspects of UK tax law so that decisions on tax disputes have a clearer path to resolution.
The Chancellor will have a particularly difficult challenge on 3rd March but will also have the chance to set the right environment for the recovery and long-term prospects of the economy by focusing on the growth of businesses.
The full submission can be found here.
If you have any questions about our work on the Budget or wider policy issues, please get in touch with lorence.nye@theqca.com and jack.marshall@theqca.com.
