Tax avoidance by the multi-nationals has been big news over the last few months and as a result, it’s likely to come under further scrutiny in the Autumn Statement. So what else is in store for businesses? Will the Chancellor have a surprise up his sleeve when it comes to corporation tax…
The Chancellor took us all by surprise in the Summer Budget by announcing that the corporation tax rate would be reduced to 18%. Surely he can’t surprise us again by announcing further reductions? Well, nothing should ever be ruled out, but I suspect that this time round the announcement on business tax may not be so welcome.
Top of the list of priorities is likely to be responses to the OECD ‘BEPS’ project, concerned with ensuring that multi-nationals pay their ‘fair share’ of tax. I expect to see some progress here, particularly in relation to restrictions on the deductibility of interest and also the use of hybrid structures which seek to exploit differences in definition of taxable entities between various countries. Although the broad outlines of the BEPS proposals are known, there is a lot of detail to be filled in and I hope that some of that, at least, will become clear in the Autumn Statement and Draft Finance Bill clauses.
On a purely domestic level, I will be looking out for announcements about tax transparency. There has been a consultation on this, covering such matters as companies being forced to publish their tax policies and attitude to tax risk. Some of this has been controversial, not least because of the additional compliance burden it will create, but the direction of travel is clear and I am expecting some announcements on how this will work in practice.
Finally I will be listening out for mentions of Entrepreneurs’ relief – the relief which allows a 10% capital gains tax rate on most disposals by individuals of shares in their trading companies. There were a number of changes to this last year intended to ensure that the relief was only available in respect of genuine trading companies. Some of these changes have had unexpected consequences, particularly in venture capital backed businesses, and I am hoping for some technical amendments to ease some of these problems.
I come back to that 18% rate – surely it can’t go any lower. Can it…?