Potentially Even Higher Corp Taxes Coming (Over 25%+)

[free-rider]

That’s hilarious! Who on earth told you that?

They can’t even pick up the phone easily ?

Ha ha, I`ll second you on that! Quality of HMRC phone staff work and knowledge has been going downhill for the last 10 years at least.
However, must give them a credit where one is due - the higher officers/specialists dealing with specific investigations (like FIS or Serious Crime Unit) mostly know their stuff and are very thorough.

 

[simon field]

mostly know their stuff and are very thorough.

I’m sure that’s what they’d like you to believe, personally I doubt it.

 

[IanSuth]

Last time i had to deal with HMRC (over a c**ked up tax code) i very luckily on about the 6th call got a guy who had been transferred down to that team to work out 3 days a week for his last few weeks before retirement.

He sorted it within about 15 mins by ignoring all of the computer systems, working it all out on a bit of paper with a pencil whilst i spoke to him then entering in the result manually as he had high enough clearance to do it. The advise I had been given initially by a drone (to ask the payroll software people to make a prior year adjustment that was wrong to force the software to fudge it right in the current year) was not only wrong it would have had unforetold consequences (lucking the payroll software firm flat out refused) they are mainly just "computer says no" dweebs

he told me he despaired for the quality of the majority of people employed and having half the number on double the pay would have been a better solution

 

[SillyBill]

The 25% rate applies to profits over £250k. If your business is making that then you're doing very well indeed and can afford to pay a bit more in tax in these troubled times, especially considering the generous support the government gave to businesses during Covid in terms of grants, furlough payments and low-cost Bounce Back loans. Profits of £50k or less will continue to be taxed at 19%.

Yawn, happy to tax the person more who is slightly bigger than you? Who'd have thunk it. Noone cares unless its their money of course.

Sizeable businesses need sizeable profits. A single piece of kit for our business can cost £250k easily, a filling/labelling line, a vacuum mixer, a 60mt heated tank... and its gone. We make north of that threshold and the profit is absolutely required, fundamentally so for the long term continuation of the business...and yes, heaven forbid, also keeping me interested by paying me commensurate to the large risks we take. Reduce after tax retained profit and you can starve a business from having enough reserves to invest to sustain itself, or enough cash to grow. The fixed assets of a reasonable sized business constantly turnover and that happens only with reasonable profits. I don't much like people describing my profits as superfluous (based on arbitrary numbers) vs their own simply because theirs are lower, on what basis is that a striver's economy? Rather like the lifetime pension allowance and other such ill-thought out policy, all it does is encourage people to put the brakes on when they hit the states prescribed buffers,

If you've ran a mid sized business before you will also know that there comes a point where a business becomes far larger to support than even the backstop that a wealthy owner can provide. That is to say liquidating all your assets, houses, cars & clothes off your back may only fund the business for a few days, at best a month. So would you run such a business light on cash? I wouldn't and don't. Hence again healthy profits and healthy cash in the bank is necessary, too large to bail out from owners' pockets so an insurance policy of appreciable cash on hand is required to protect against unforeseen events, a slow year, or whatever...It is lazy IMV to conclude £250k is some sensible number to start ramping tax up at. £250k is a relative number, for a small business (and a socialist) it looks like a fortune, to somebody running a medium sized manufacturing business you may start sweating buckets if you made less than that one year, that'd be dangerously close to the wire.

I may have agreed about the notion of helping the gov out in troubled times too, if I wasn't cynical enough to know that when they get their claws into you then they do not let go. Taxes will be a lot quicker to go up than they'd be to go down.

 

[simon field]

Yawn, happy to tax the person more who is slightly bigger than you? Who'd have thunk it. Noone cares unless its their money of course.

Sizeable businesses need sizeable profits. A single piece of kit for our business can cost £250k easily, a filling/labelling line, a vacuum mixer, a 60mt heated tank... and its gone. We make north of that threshold and the profit is absolutely required, fundamentally so for the long term continuation of the business...and yes, heaven forbid, also keeping me interested by paying me commensurate to the large risks we take. Reduce after tax retained profit and you can starve a business from having enough reserves to invest to sustain itself, or enough cash to grow. The fixed assets of a reasonable sized business constantly turnover and that happens only with reasonable profits. I don't much like people describing my profits as superfluous (based on arbitrary numbers) vs their own simply because theirs are lower, on what basis is that a striver's economy? Rather like the lifetime pension allowance and other such ill-thought out policy, all it does is encourage people to put the brakes on when they hit the states prescribed buffers,

If you've ran a mid sized business before you will also know that there comes a point where a business becomes far larger to support than even the backstop that a wealthy owner can provide. That is to say liquidating all your assets, houses, cars & clothes off your back may only fund the business for a few days, at best a month. So would you run such a business light on cash? I wouldn't and don't. Hence again healthy profits and healthy cash in the bank is necessary, too large to bail out from owners' pockets so an insurance policy of appreciable cash on hand is required to protect against unforeseen events, a slow year, or whatever...It is lazy IMV to conclude £250k is some sensible number to start ramping tax up at. £250k is a relative number, for a small business (and a socialist) it looks like a fortune, to somebody running a medium sized manufacturing business you may start sweating buckets if you made less than that one year, that'd be dangerously close to the wire.

I may have agreed about the notion of helping the gov out in troubled times too, if I wasn't cynical enough to know that when they get their claws into you then they do not let go. Taxes will be a lot quicker to go up than they'd be to go down.

Excellent post sir!

And of course, @scstock is perfectly free to take those same risks, to scale their business up and pay a whole load more tax, which is what they seem to want to happen.

 

[scstock]

Yawn, happy to tax the person more who is slightly bigger than you? Who'd have thunk it. Noone cares unless its their money of course.

Sizeable businesses need sizeable profits. A single piece of kit for our business can cost £250k easily, a filling/labelling line, a vacuum mixer, a 60mt heated tank... and its gone. We make north of that threshold and the profit is absolutely required, fundamentally so for the long term continuation of the business...and yes, heaven forbid, also keeping me interested by paying me commensurate to the large risks we take. Reduce after tax retained profit and you can starve a business from having enough reserves to invest to sustain itself, or enough cash to grow. The fixed assets of a reasonable sized business constantly turnover and that happens only with reasonable profits. I don't much like people describing my profits as superfluous (based on arbitrary numbers) vs their own simply because theirs are lower, on what basis is that a striver's economy? Rather like the lifetime pension allowance and other such ill-thought out policy, all it does is encourage people to put the brakes on when they hit the states prescribed buffers,

If you've ran a mid sized business before you will also know that there comes a point where a business becomes far larger to support than even the backstop that a wealthy owner can provide. That is to say liquidating all your assets, houses, cars & clothes off your back may only fund the business for a few days, at best a month. So would you run such a business light on cash? I wouldn't and don't. Hence again healthy profits and healthy cash in the bank is necessary, too large to bail out from owners' pockets so an insurance policy of appreciable cash on hand is required to protect against unforeseen events, a slow year, or whatever...It is lazy IMV to conclude £250k is some sensible number to start ramping tax up at. £250k is a relative number, for a small business (and a socialist) it looks like a fortune, to somebody running a medium sized manufacturing business you may start sweating buckets if you made less than that one year, that'd be dangerously close to the wire.

I may have agreed about the notion of helping the gov out in troubled times too, if I wasn't cynical enough to know that when they get their claws into you then they do not let go. Taxes will be a lot quicker to go up than they'd be to go down.

Good points well made.

 

[scstock]

Excellent post sir!

And of course, @scstock is perfectly free to take those same risks, to scale their business up and pay a whole load more tax, which is what they seem to want to happen.

It's the Conservative government that is raising the tax, not me.

 

[simon field]

It's the Conservative government that is raising the tax, not me.

Apologies, I thought you said anyone who has profits over £250k is doing really well, and therefore should be penalised.

 

[scstock]

I did not say penalised - I said "can afford to pay a bit more in tax in these troubled times".

The latest proposals being floated by this Conservative government are increasing the rate of Capital Gains Tax and reducing the Dividend allowance.

 

[simon field]

I did not say penalised - I said "can afford to pay a bit more in tax in these troubled times".

I think you may be missing the point.

How do you know they can afford to pay more? How do you know what their outgoings are?

 

[Newchodge]

I think you may be missing the point.

How do you know they can afford to pay more? How do you know what their outgoings are?

If CT is levied on profit, their outgoings will have already gone out, won't they?

 

[Mark T Jones]

I'll be honest; I don't think corporation tax is high on the list of challenges businesses will be facing for the next couple of years.

 

[scstock]

If a business is making an annual profit of £250k then their outgoings are £250k less than their income, no?

I take the point made by SillyBill that some businesses need cash reserves to provide for large capital expenditure. Maybe that's an argument for taxing dividends more, rather than retained profits.

But we are faced with a £50bn budget deficit. How do you think that is going to be filled? We already know the financial markets don't think it should be from further borrowing.

 

[free-rider]

I did not say penalised - I said "can afford to pay a bit more in tax in these troubled times".

The latest proposals being floated by this Conservative government are increasing the rate of Capital Gains Tax and reducing the Dividend allowance.

It still seems odd to me that we are living in a capitalist country but many are happy with the idea that businesses should pay higher rate of tax purely because they are successful/make more profits than businesses which are not doing as well. Kind of punishment for doing well imo.

 

[Newchodge]

It still seems odd to me that we are living in a capitalist country but many are happy with the idea that businesses should pay higher rate of tax purely because they are successful/make more profits than businesses which are not doing as well. Kind of punishment for doing well imo.

Personal income tax rates rise with higher earnings. Presumably it is an argument based on affordability.

 

[free-rider]

Personal income tax rates rise with higher earnings. Presumably it is an argument based on affordability.

I don`t think the progressive tax rates for personal income tax are fair as well. Yes, when one starts earning more - their tax bill should increase, but why should someone on £50k+ be paying combined 43.25% in IT & NIC instead of 33.25% paid by someone on below £50k?

The 10% actual increase in taxes is no way justified other than by odd "broader shoulders should carry broader load". Especially taking in to account that usually higher earners benefit the least from the share of tax receipts.

 

[IanSuth]

I don`t think the progressive tax rates for personal income tax are fair as well. Yes, when one starts earning more - their tax bill should increase, but why should someone on £50k+ be paying combined 43.25% in IT & NIC instead of 33.25% paid by someone on below £50k?

The 10% actual increase in taxes is no way justified other than by odd "broader shoulders should carry broader load". Especially taking in to account that usually higher earners benefit the least from the share of tax receipts.

Not all are progressive taxes - remember once you go over about 50k your NI is at a lower rate as you hit UEL so that offsets some of the increased IT rate

 

[free-rider]

Not all are progressive taxes - remember once you go over about 50k your NI is at a lower rate as you hit UEL so that offsets some of the increased IT rate

The example above already accounted for reduction in NIC rate. The effective tax difference between the BR and HR taxpayers is still 10%.

 

[japancool]

Capital gains tax might rise.

 

[free-rider]

I just hope the current Gov won`t increase dividend tax - ok with removal of dividend allowance and can suck up the U-turn on bringing the rates back to 7.5/32.5% etc. Will however be very unhappy if they decide to bring the dividend tax rates more in line with IT.

 

[japancool]

I just hope the current Gov won`t increase dividend tax - ok with removal of dividend allowance and can suck up the U-turn on bringing the rates back to 7.5/32.5% etc. Will however be very unhappy if they decide to bring the dividend tax rates more in line with IT.

Bring back Liz Truss, eh?

 

[free-rider]

Bring back Liz Truss, eh?

Definitely not the solution I would trust. However, increased CT rates and meddling with dividend tax won`t really encourage investment in UK. With no investment and manufacturing being on decline for decades, how sustainable is UK`s services based economy? Especially during the recession times to come.

 

[Mark T Jones]

If a business is making an annual profit of £250k then their outgoings are £250k less than their income, no?

Absolutely not a safe assumption. Taxable profit is often far removed from cashflow.

 

[IanSuth]

I just hope the current Gov won`t increase dividend tax - ok with removal of dividend allowance and can suck up the U-turn on bringing the rates back to 7.5/32.5% etc. Will however be very unhappy if they decide to bring the dividend tax rates more in line with IT.

All the rates should be simplified (and NI rolled into general taxation) and as much as is possible effective taxation of an amount of income should be the same through whatever means. There shouldn't really be a difference whether you receive money as income, dividend or via any other vehicle.

It is the disparities which creates loopholes, work for tax advisors and the need for a mass of civil servants tracking and checking it all.

Surely if there was a simple "any money taken out of your business above your personal tax limit will be taxed at 33.3%" the savings in government complexity and admin would cover that being a lower rate for some (or at least i would love to see an actual study done modelling it)

 

[IanSuth]

Definitely not the solution I would trust. However, increased CT rates and meddling with dividend tax won`t really encourage investment in UK. With no investment and manufacturing being on decline for decades, how sustainable is UK`s services based economy? Especially during the recession times to come.

The ERG (who still have a lot of sway in parliament) do not want mass manufacturing - just prototyping and high end specialist work. The whole idea is that the uk moves away from work that relies upon human labour and to knowledge based work - yes that is simplistic, so is their plan and that is why trussonomics failed as the economy is not simple and not everyone is cut out for the knowledge economy.

 

[japancool]

The whole idea is that the uk moves away from work that relies upon human labour and to knowledge based work

Doesn't really make sense. All advanced technology economies have some manufacturing capability - Samsung still make some of their TVs in Korea and Mitsubishi Heavy Industries' facilities are mostly in Japan.

 

[Newchodge]

Doesn't really make sense. All advanced technology economies have some manufacturing capability - Samsung still make some of their TVs in Korea and Mitsubishi Heavy Industries' facilities are mostly in Japan.

On what basis do you think anything the ERG wants would make sense?

 

[simon field]

I hope the personal allowance gets raised, and income tax rates get raised as well.

Surely, if they want to disincentivise higher earners, they also need to incentivise lower earners, just to balance things out?

 

[japancool]

On what basis do you think anything the ERG wants would make sense?

On the basis that they are, in theory, intelligent people, if driven by ideology. Perhaps that is too much to expect.

 

[Newchodge]

I hope the personal allowance gets raised, and income tax rates get raised as well.

Surely, if they want to disincentivise higher earners, they also need to incentivise lower earners, just to balance things out?

The expectation is a further freeze on tax free allowances, dragging more people at the lowest end into paying income tax.

 

[simon field]

The expectation is a further freeze on tax free allowances, dragging more people at the lowest end into paying income tax.

Ah well at least that’s something!

 

[IanSuth]

Doesn't really make sense. All advanced technology economies have some manufacturing capability - Samsung still make some of their TVs in Korea and Mitsubishi Heavy Industries' facilities are mostly in Japan.

Irrelevant of whether we feel it makes sense Minford is the key economist behind the ERG, it is his theories which the like of Rees-Mogg rely upon

 

[IanSuth]

The expectation is a further freeze on tax free allowances, dragging more people at the lowest end into paying income tax.

And more into higher rate as well as the thresholds won't rise with inflation either. A lot more people than now will be in the 40% bracket within a few years as average earning and that threshold become closer and closer

 

[japancool]

Irrelevant of whether we feel it makes sense Minford is the key economist behind the ERG, it is his theories which the like of Rees-Mogg rely upon

Hmm. Have his theories been put into practise anywhere?

 

[IanSuth]

Hmm. Have his theories been put into practise anywhere?

Ish

Here is a critique of his (well economists' for Brexit which is now economists' for free trade) theories

https://cep.lse.ac.uk/pubs/download/brexit06.pdf

Note some of his assumptions and plans were.......hairbrained in my view, such as to quote that critique

Professor Patrick Minford, one of the ‘Economists for Brexit’, argues that leaving the European Union (EU) will raise the UK’s welfare by 4% as a result of increased trade. His policy recommendation is that following a vote for Brexit, the UK should strike no new trade deals but instead unilaterally abolish all its import tariffs

Under this policy (‘Britain Alone’), he describes his model as predicting the ‘elimination’ of UK manufacturing and a big increase in wage inequality. These outcomes may be hard to sell to UK citizens as a desirable political option

This is what i meant by on a pure economics point of view a hard hard Brexit might be on average good, but for those it was bad it would be very bad so I couldn't support it for socio welfare reasons (and because i thought the country wouldn't on average either and so would water it down and make it worse than pointless)

 

[Picture Bute]

It's the Conservative government that is raising the tax, not me.

Don't worry, the tory fanbois on here will soon respond to that with 'Yeah, but Corbyn....'