Key tax announcements in Labour’s plan for business
On 1 February the Labour party unveiled its plan to work in partnership with business which included key tax policy pledges
Labour makes key tax announcements
On 1 February 2024 Labour announced a number of key tax pledges. Corporation tax will not be increased from its current rate of 25 percent during the next parliament if the party wins the upcoming General Election, and full expensing, research and development (R&D) tax credits, the patent box regime and the annual investment allowance will all be maintained. Within its first six months, an incoming Labour Government would publish a roadmap for business taxation. It will also trial greater use of rulings and clearances to provide certainty to businesses looking to invest.
What was announced?
On 1 February Labour unveiled its vision of working in partnership with business if it wins the General Election. The announcements included a business tax plan aimed at providing increased stability to boost investment and growth.
Labour will cap the headline rate of corporation tax at 25 percent for the lifetime of the next Parliament. In a speech at the Labour business conference, Rachel Reeves, Shadow Chancellor of the Exchequer, stated that the 25 percent corporation tax rate strikes the correct balance between the needs of the country’s public finances and the demands of a competitive global economy. However, she did not rule out acting if international tax changes threatened to undermine UK competitiveness.
The party committed to maintaining full expensing and to not making capital allowances less generous than their current level. HMRC will be asked to produce guidance on which assets are eligible for the different types of capital allowances.
Announcements also confirmed that, should they get into power, Labour will maintain R&D tax credits, the patent box regime and the annual investment allowance.
Labour will also publish a business tax roadmap in the first six months of its government which will set out scheduled changes to corporation tax reliefs and capital allowances for five years.
One announcement that will generate interest with businesses is the intention to explore a greater use of rulings and clearances. These would set out the tax treatment of a potential investment to provide “more certainty to businesses”.
Labour also intends to continue with multilateral initiatives including the global minimum rate of corporation tax, a deal on the taxation of digital multinationals and concerted action to tackle tax avoidance.
Other announcements affirmed previous statements including:
- Strengthening the current windfall tax on North Sea oil and gas producers;
- Replacing business rates with a new system of business property taxation that rebalances the burden between high street businesses and digital multinationals;
- Reforming the Apprenticeship Levy into a more flexible Growth and Skills Levy, banning ‘exploitative zero hours contracts’ and ending ‘fire and rehire’; and
- Reviewing the pensions and retirement savings landscape.
From a policy perspective they have confirmed that they will hold only one Budget every November, four months before the new tax year, as well as introducing ‘iron clad fiscal rules and a fiscal lock’.
To further improve the tax system they intend to focus on digitalisation of the tax system to generate ‘productivity gains’ for businesses through:
- Reducing the complexity of the tax system for businesses;
- Minimising the amount of data they need to provide to HMRC; and
- Improve the accuracy and speed of record-keeping.
During a Q&A with press, however, Reeves would not commit to raising income tax thresholds. She also reiterated proposals to close ‘loopholes’ for private schools, private equity managers and non-domiciled individuals, indicating the latter would be replaced with a ‘fairer system’ for those that are in the UK for a short period of time.
Businesses will be pleased to see formal statements from Labour about their tax plans should they form the next Government. There will inevitably be more to come over the coming months as Labour set their stall for the upcoming general election.
