SMEs fear return of 50% tax say Close Brothers
SMEs are becoming concerned about opposition proposals to bring back the 50% income tax rate if Labour wins the next election, saying this would put aspects of the UK’s recovery at risk, according to research by Close Brothers Invoice Finance report Harris & Co accountants Northampton, who specialise in advising small and medium sized entities on a range of tax, accounting and business issues.
The quarterly Close Brothers Business Barometer, which surveys SMEs on financial issues affecting their business, found that 29% think that Labour’s proposed reintroduction of the 50% tax rate will have a negative effect on the economy.
Over half of respondents said they had concerns that such a move will stifle entrepreneurship in the UK, while a fifth believe that it will drive keys skills and talent from the economy.
In a speech earlier this week Paul Johnson, director of the Institute for Fiscal Studies (IFS) said Labour’s commitment to restoring the 50p rate of income tax on incomes over £150,000 was ‘unlikely to be effective in raising revenue’ relative to the current 45p rate.
Johnson was highly critical of Labour’s other pledge, to re-introduce a 10% starting rate of tax, saying there was ‘no plausible coherent justification for such a policy’ and that increasing allowances was a more effective and less complicated alternative.
The Close Brothers Business Barometer also found that more than half of UK SMEs anticipate a rise in interest rates by spring 2015. Half of those respondents said any increase would have a negative impact on their cashflow, by increasing borrowing costs and reducing consumers’ disposable income and the amount they could finance via debt.
David Thomson, CEO of Close Brothers Invoice Finance said: ‘We need to ensure we have the right conditions to allow businesses to grow and flourish. It’s important that our top talent isn’t driven elsewhere due to unfavourable tax rates and rising interest rates. Entrepreneurship will be key to getting the economy back on track and ensuring our GDP continues to grow at the rate the International Monetary Fund has predicted"