Chancellor Kwasi Kwarteng has announced £45 billion worth of tax cuts including scrapping the rise in national insurance, freezing corporation tax and cancelling alcohol duty rises, but there has been no move on VAT or rates.
The 1.25% percentage point rise in National Insurance contributions that took effect earlier this year will be scrapped from November and the proposed 6% rise in corporation tax from 19% to 25% planned has also hit the dust.
UKHospitality CEO, Kate Nicholls, commentes, “The stated objectives of boosting growth and tackling inflation rightly put business at the heart of the Govt’s agenda, but today’s measures will take time to take effect.
“The Chancellor committed to making the UK a globally competitive tax regime, yet overlooked two obvious levers to achieve that, through lower VAT and business rates reliefs. Our VAT rate is the highest in Europe, which is starkly at odds with ambitions for global tax competitiveness and will hopefully be addressed in the autumn Budget, if not before.
“While tax free shopping for overseas customers is a welcome step to attract overseas tourists, a far more immediately impactful step would be to reduce VAT for our domestic customers. Our VAT rate is the highest among modern economies, so if we want a globally competitive market, we need lower VAT and an equitable alternative to business rates. Without such measures – which would help to keep prices down for customers – thousands of businesses and many more jobs will be lost.
“Confirmation of the energy and NIC proposals will allow our businesses to better plan for survival. Indeed, today’s announcement includes a number of positive measures which will bear fruit in due course, but more is urgently needed to help struggling businesses survive through the winter. There’s a clear shortfall between the positive tax plans and the lack of needed immediate business support.”
The Chancellor has also cancelled planned alcohol duty rises. He said, “Our drive to modernise also extends to alcohol duties. I have listened to the industry concerns about the ongoing reforms. I will therefore intrude an 18-month transitional measure for wine duty.
“I will also extend draught relief to cover smaller kegs of 20 litres and above, to help smaller breweries. And at this difficult time, we are not going to let alcohol duty rates rise in line with RPI.
“So I can announce that the planned increased in duty rates for beer, for cider and wine, and for spirits will all be cancelled.”
But although he UK Government has abolished the 45p higher rate of income tax, which affects 629,000 people who earn over £150,000, is potentially politically explosive, tax is a devolved responsibility so it will be up to the Scottish Government to decide whether or not to follow suit. He also revealed that he had tasked his tax officials with simplifying the tax code.
In other moves he removed the banker bonus cap, said the Government would legislate to force unions to put all offers to their members to ensure strikes can only be called once talks have ‘genuinely’ broken down, and removed stamp duty on ruches up to £250K (this is a devolved power in Scotland) and is removing the increase to dividend tax rates, which had been rough in alongside the NI rise. This will be removed from April 2023.
However hospitality bosses will be disappointed in the fact that there has been no move on a reduction in VAT for hospitality and no mention of business rates.
