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Research by Bloomsbury Professional, a tax and accounting information group, among accountancy firms found that employers’ National Insurance Contributions were seen as the highest priority for tax cuts, with half of respondents in favour of a reduction.
The second most important tax to be reduced is employees’ NICs, with a similar proportion in favour of cuts.
Employers currently pay up to 13.8 per cent of their employees’ earnings [and benefits] in NICs.
Martin Casimir, Managing Director of Bloomsbury Professional, said: “National Insurance is often seen as a tax on creating new jobs. At this still early stage of the UK’s recovery, easing the burden on businesses could help provide a much-needed boost for growth and the labour market.
“Working closely with companies of all sizes, accountants are well-placed to see where there is real pressure on firms in terms of business costs and tax liabilities. In an economy that’s still getting back on its feet, there’s a feeling that keeping employers’ NICs at current levels risks causing a drag on job creation and stifling business development and expansion.
“Despite being overlooked in the recent Budget, this is an issue which could and should be on the election agenda. High employment costs can act as a deterrent to businesses from taking on new staff, particularly during challenging economic times, as they are well aware that the salaries they pay represent only a fraction of what that worker will actually cost.”
Tax breaks
Bloomsbury Professional notes that although the Government offers some tax breaks in this area to businesses paying employers’ Class 1 National Insurance, allowing them to claim up to £2,000 off their National Insurance bill, many respondents would like to see a broader reduction which would further encourage more hiring and expansion.
Martin Casimir said: “Employees who are feeling the pinch are also seen as being in need of NIC reform, which for some time has been a means for governments to introduce “hidden” tax increases without raising the headline rate of income tax.
“While moves to increase the tax-free personal allowance in the Budget are welcome, reducing employees’ NICs would also go a long way to helping workers feel better off – particularly those on lower incomes.”
The third and fourth choice taxes that respondents saw as ripe for reductions are Inheritance Tax and VAT, with 43 per cent and 42 per cent of respondents respectively saying they would support reductions in these areas of tax.
Tax rises
Controversially, should tax rises be necessary in some areas in order to secure cuts in others, in first place 46 per cent of respondents said their preferred option would be an increase in the top rate of income tax.
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In second place, two-fifths felt that the annual remittance levy on non-doms could be increased.
Martin Casimir said: “The amount of tax non-doms pay has become the subject of increasingly intense debate. From an accountant’s perspective, a higher levy, together with greater transparency, could help restore the reputation of non-domiciled status as a legitimate tax position for wealthy, international individuals, [while still being a generous and attractive system].”
Instead of paying UK tax on overseas income, non-doms can choose to pay an annual charge of between £30,000 and (from 6 April this year) £90,000, depending on how long they have been in the UK.
Bloomsbury’s research also found that a significant proportion of accountants (40 per cent) also support an increase in business’ capital allowances for investment in assets like equipment and machinery.
Investment allowance
The annual investment allowance had been due to fall from £500,000 this year to just £25,000 in 2016, however the final allowance figure for next year is now due to be set out in the Autumn Statement, and is set to be higher than £25,000.
Martin Casimir said: “The fact that capital allowances are not going to be cut back as much as previously thought is good news for capital-intensive businesses, but there’s now a huge amount of uncertainty about how much they will be able to invest next year. That’s going to make long-term business planning much more difficult.”
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Susie Hughes © Shout99 2015
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