What are Labour’s plans for business tax?
We recently reviewed Labour’s manifesto to provide insight into their vision for UK innovation. In this article, we take a look at their tax plans for large and small businesses.
In a white paper published in February 2024, Labour’s Business Partnership For Growth, Sir Keir Starmer wrote that the business community needs “the certainty of economic and tax decisions being taken carefully and with the long term in mind.”
The paper was designed to reassure the business community about a potential Labour government and, while it admits that they’ve not yet put “meat on the bones” in terms of policy, it does give an outline of how the new government plans to approach business taxation, including Corporation Tax (CT) and R&D Tax Credits. As such, it works as a rough guide of the Labour Party’s plans for UK business over the next parliament. Below, we answer frequently asked questions based on what’s been proposed.
What are Labour’s plans for Corporation Tax (CT)?
Labour has promised not to raise Corporation Tax, capping it at 25% for the next parliament. They may even cut Corporation Tax, but only if another country with an advanced economy makes changes in a way that would threaten UK competitiveness.
What are Labour’s plans for R&D Tax Credits?
Labour plans on keeping the “current structure” of the R&D Tax Credits scheme. They believe there have been too many changes to R&D relief recently (indeed, five changes were announced in the last parliament), so there probably won’t be too many alterations in the immediate future. They’ve also said they’ll focus on cracking down on abuses and errors.
There are signs that Labour may take a sector-specific approach to R&D Tax Credits as they plan to carry out an industry review starting with Life Sciences. The aim of the review is to understand how R&D relief benefits specific “world-leading” sectors and they also hope to uncover if there are any high-risk industries for error and fraud.
Will Labour keep the full expensing Capital Allowance?
Labour have said that it plans to keep the full-expensing Capital Allowance as well as the Annual Investment Allowance (AIA). They’ve also said that they’ll make the rules clearer so that businesses have greater clarity on qualifying expenses.
Are Labour keeping the Patent Box?
Patent Box allows businesses to reduce their Corporation Tax on qualifying intellectual property (IP) income to just 10%. Labour supports the scheme, saying that they will keep it to help reward UK business innovation.
Are Labour getting rid of business rates?
Labour wants to replace business rates with “business property taxation” instead. The move is part of their plan for high streets, and is designed to help physical retail stores compete with online giants.
Will Labour keep the apprenticeship levy?
Labour wants to replace the Apprenticeship Levy with a “Growth and Skills Levy,” which will be the same rate of 0.5% of an employer’s annual pay bill. However, if employers wish to, they can spend 50% of their contributions on non apprenticeship training, such as modular courses, functional skills and pre-apprenticeship training. This change is designed to give businesses more flexibility when upskilling their workforce.
How often will there be a Budget under Labour?
Changes to Corporation Tax, R&D Tax Credits, and other business-specific taxes are generally announced at fiscal events such as the Budget, which can take place any time of year but typically happens in Spring or Autumn. Labour has said that they want to create stability for businesses by having just one Budget every autumn. The exact date may vary but will be at least four months before the new tax year.
Will there be any other tax changes for large and small businesses?
We probably won’t hear about too many other tax changes for large and small businesses until Labour publishes their “roadmap for business taxation”, which will give businesses a timeline for tax changes so they can plan ahead confidently. The roadmap is due to be published within the next six months (so, before January 2025). Additionally there is no mention of any changes to the energy incentives and exemptions.
How can Leyton help?
Capital Allowances, Patent Box and R&D Tax Credits are tax relief schemes offered by the UK government to incentivise investment and innovation, growing the UK’s economy. The schemes can provide valuable cash benefits for businesses, but claiming can be complex and time-consuming. They’re also subject to change, as governments sometimes revise regulations – leaving many businesses concerned about compliance as they are unsure of how to apply the latest rules.
Leyton UK has a team of industry experts and tax specialists who help large and small businesses make the most of the schemes so they can compliantly claim the full amount they’re entitled to. The rewards can be significant – we’ve secured over £1.1 billion of innovation incentives for our clients.
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Email: contact@leyton.com
