Kick-starting the ailing economy with a ‘de-coupling’ of the maximum Stamp Duty rate, currently at four per cent, and a corporation tax rate cut from 28 per cent to 25 per cent are just two measures BDO Stoy Hayward in Southampton believes the Chancellor could introduce in next week’s budget to help South Coast businesses survive the recession.
As a higher percentage of commercial property sales are taxed at the four per cent Stamp Duty Land Tax rate, the accountancy firm says this step could give the ailing commercial real estate market a much-welcomed boost. A reduction in corporation tax to 25 per cent (or lower) could restore tax competitiveness.
Alternatively, a short-term reduction in the employers’ rate of National Insurance could introduce a further – but temporary – fiscal stimulus to support employment levels. This step would boost the profitability of major employers and influence them to reduce redundancies as the recession in the real economy deepens.
The Chancellor could also comment on future VAT rates and indicate that this tax, which currently collects around £80 billion per annum, could be increased beyond the previous 17.5 per cent rate when the temporary reduction to 15 per cent expires in January. The UK’s 17.5 per cent VAT rate is towards the lower end of major European countries.
A clear explanation of HMRC’s position regarding UK taxation (particularly of businesses) and the UK’s European Union Treaty obligations (notable the “Freedom of Establishment” and “Freedom of Movement” Articles) is also called for.
“Now is the time for the Government to put economic priorities over political expediency,” commented Stuart Lisle, Tax Partner at Southampton’s BDO Stoy Hayward. “This will need to be a budget setting out a road map for Government finances of medium-term austerity for the long-term prosperity of south-coast businesses.”