The chancellor (right) claims that these measures will ensure large businesses will pay tax in years where they make substantial gains in diverted profits, and will prevent businesses from avoiding tax by borrowing excessively in the UK to fund overseas activities. The new measures to come into effect from April 2017 expect to raise some £5bn from the UK’s largest businesses. The news received mixed reviews.
According to Chas Roy-Chowdhury, (left) head of tax at ACCA, the statement under-delivered. “This Autumn Statement would have been an ideal time for the chancellor to consider a further corporation tax cut to 15 per cent. In an increasingly competitive global environment, where major players like the US are considering hefty corporation tax cuts, a further cut would have given business a sense of security in a changing world, and positioned Britain as ahead of the curve and truly ‘open for business’.
“The announcement that the government will be raising £5bn from restricting interest relief and loss relief from large companies also belies the idea that Britain is ‘open for business’. This penalty appears to be more of a one-size-fits-all measure which will negatively impact large businesses that have incurred bona fide interest charges and losses before paying tax.”
Stella Amiss, ( right) international tax partner at PwC, was more optimistic claiming that the fact Hammond has committed to cutting corporation tax to 17 per cent by 2020 allows a “bargaining chip” with the EU. She said: “In answer to critics that the UK has joined the race to the bottom, the chancellor can highlight that he has actually extended the corporation tax base, but cutting tax relief on interest. It’s not just the percentage applied, but what it applies to that matters.
Stephen Roper, of Warwick Business School, is Professor of Enterprise, researching SME growth and Director of the Enterprise Research Centre commented, “The productivity challenge is significant and borrowing to fund a £23bn Productivity Investment Fund to address it is a gamble. As the Chancellor indicated it currently takes an average UK worker 5 days to generate the same productivity as German employees generate in 4 days.
"How effective will the Chancellor’s package of measures be in addressing the productivity challenge? Only time will tell, but public investment alone is unlikely to close the gap. UK firms too will need to significantly increase their investment, which is perhaps unlikely given the uncertainties of Brexit.
"Other aspects of the Statement will be welcomed by business. Confirmation of planned corporation tax reductions to 17 per cent, business rate reductions and rural rate relief are all positive steps. Less welcome in some quarters will be the increase in insurance taxes.
"Reflecting Theresa May’s comments in June on the steps of 10 Downing Street, Hammond signalled his aim to ‘build an economy which works for everyone’. Cash for regional transport, City Deals and the Growth Fund will help perhaps, but there was little here to directly address issues of inclusivity or boosting growth among the UK’s poorest communities."
SCOTLANDIS CALLS FOR DIGITAL SKILLS INVESTMENT
Polly Purvis, CEO of ScotlandIS, says: "We welcome the Chancellor’s announcement of a National Productivity Investment Fund worth £23bn, including an additional £2 billion per year for R&D in artificial intelligence, robotics and other technologies to catalyse the commercialisation of innovative ideas. Digital technologies are drivers of productivity and economic growth and form strong foundations for the future.
"We were also pleased to hear that the Prime Minister and the Chancellor recognise the link between world-class digital connectivity and increased productivity and will therefore invest £1bn by 2020-21 into broadband and 5G roll out, supported by a 100% business rates relief for new full-fibre infrastructure for 5 years.
"A large proportion of our members are small and medium sized companies and access to growth capital is often difficult for them. The announced £400m of additional investment into venture capital funds is a welcome support for Scottish technology firms looking to scale. Given the downgrade of the economic outlook for 2017 and beyond, businesses urgently require help to open up new markets. Doubling the UK Export Finance capacity, as promised by the Chancellor, is a step into the right direction.
"This Autumn statement includes a number of measures that ScotlandIS called for following the EU referendum. However, both the UK and Scottish Governments need to do more to support businesses faced with continued uncertainty and major changes to their operating environment. We need immediate action on digital skills to create a more competitive workforce truly capable of meeting today’s and tomorrow’s challenges.
"ScotlandIS urges the Scottish Government to step up with concrete proposals on skills and to match the Chancellor’s investment announcements for digital connectivity, innovation and export support in their December budget."