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Lib Dems aim to simplify business taxation

The Liberal Democrats are banking on a £50bn remain bonus plus 1% increases in income tax and corporation tax to fund the NHS, free childcare and training wallets for all adults.

22nd Nov 2019
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Jo Swinson Liberal Democrats
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The headline for the Liberal Democrat manifesto is uncompromising: “Stop Brexit”, with the sub-heading “Build a Brighter Future”. The full manifesto, constructed around “a £50bn Remain Bonus”, avoids what might sound like a narrow approach.

It concentrates on education, the NHS and seeking to make the economy fairer, partly through a “regional rebalancing programme”, along with efforts to support small and medium-sized businesses through alliances with the banking sector.

There are also plans to utilise technological developments to assist industry and the environment.

A better deal for entrepreneurs and small business

The Lib Dems have announced a series of plans to:

  • Create a new ‘start-up allowance’ to help new business with their costs in the early weeks.
  • Support fast-growing businesses seeking to scale up through mentoring support.
  • Prioritise small and medium-sized businesses in the rollout of hyper-fast broadband.
  • Require all government agencies (and associated contractors) and companies with more than 250 employees to sign up to an enforceable prompt payment code.
  • Ensure that the company at the top of a supply chain cannot shore up its own cashflow at the expense of smaller suppliers.
  • Expand the activities of the British Business Bank, enabling it to tackle the shortage of equity capital for growing firms and provide long-term capital for medium-sized businesses.
  • Provide a supportive framework to develop social enterprises.
  • Expand the rights and benefits available to those in insecure forms of employment, such as offering parental leave and pay to the self-employed.
  • Finance the transformation of town centres by expanding the Future High Streets Fund.
  • Help protect high streets and town centres by scrapping the rule which allows developers to convert offices and shops into residential properties without planning permission.

Better business

The Lib Dems propose to revamp the business model with a raft of ideas that include:

  • Promoting employee ownership by giving staff in listed companies with more than 250 employees a right to request shares to be held in trust for their benefit.
  • Strengthening worker participation in decision-making with representation on remuneration committees.
  • Encouraging new forms of incorporation and a diversity of business types.
  • Requiring binding and public votes of shareholders on executive pay policies.

Fair taxes

The manifesto document is relatively light on the detail of tax policy, but it does contain a number of measures that the party wishes to implement.

  • Restore corporation tax to 20% (from current 19%) and keep the rate stable.
  • Raise income tax by 1% to pay for health and social care, in the longer-term introducing a health and care tax.
  • Abolish the capital gains annual exemption and tax gains at the same rates as income.
  • Simplify business taxation thereby lowering administration costs and reducing tax avoidance opportunities.
  • End retrospective tax changes such as the loan charge and review the proposals to change IR35 (off-payroll working).
  • Scrap the marriage tax allowance (presumably this means transferable marriage allowance worth £250 to basic rate taxpayers).
  • Replace business rates in England with a “commercial landowner levy” based on the land value of commercial sites rather than their full capital value. The idea is to shift the burden of taxation from tenants to landowners.
  • Refund FE colleges for the VAT they pay.
  • Take tough action against corporate tax evasion and avoidance (sic), especially by international tech giants and large monopolies by:
  • Introducing a general anti-avoidance rule, as opposed to the general anti-abuse rule (GAAR) which has been in place since 2013.
  • Setting a target for HMRC to reduce the tax gap and investing in more staff to enable it to meet it.
  • Reforming place of establishment rules to stop multinationals unfairly shifting profits out of the UK.
  • Improving the digital sales tax to ensure tech giants pay their fair share.
  • Supporting and building on the OECD’s proposals to require multinationals to pay tax which is more closely related to their sales in every country in which they operate.

Future of work

The ethos is introduced with the statement that: “People should have secure jobs, with proper rights and fair pay.”

To this end, the Lib Dems wish to institute a review of the Living Wage and introduce a Worker Protection Enforcement Authority.

They also plan to allow flexible working from day one for all, unless there are significant business reasons that prevent this.

Gig economy

The party recognises that current legislation has been outstripped by changes in working practices, particularly the gig economy. The Lib Dems therefore propose:

  • Establishing a new ‘dependent contractor’ employment status, with entitlements to basic rights such as minimum earnings levels, sick pay and holiday entitlement.
  • Reviewing the tax and NIC status of employees, dependent contractors and freelancers to ensure fair and comparable treatment.
  • Setting a 20% higher minimum wage for people on zero-hours contracts to compensate them for the uncertainty of fluctuating hours of work.
  • Giving a right to request a fixed-hours contract after 12 months for ‘zero hours’ and agency workers, not to be unreasonably refused.
  • Reviewing pensions rules so that those in the gig economy don’t lose out and portability between roles is protected.
  • Shifting the burden of proof in employment tribunals regarding employment status from individual to employer.

Skills wallet

This is a new training and education allowance to be given to every adult in England awarded in tranches: £4,000 at age 25, £3,000 at age 40 and £3,000 at age 55. These amounts can be topped up by employers or local government.

The apprenticeship levy will also be expanded.

Childcare

Like the Greens, the Lib Dems wish to offer free high-quality childcare for full-time working parents of children from age 9 months to 2 years, and for all children aged 2 to 4 years whether the parents are in full-time work or not.

Green issues

There is a raft of green issues with a net-zero climate target of 2045.

The tax system will be used as a tool to cut emissions, for example by reducing VAT on electric vehicles to 5%. In addition, air passenger duty on international flights will be reformed, with a higher than normal rate for frequent flyers and a reduced rate for those who only fly once or twice a year.

Pensions

The party wishes to retain the triple lock on the state pension and ensure that women born in the 1950s do not lose out from recent changes to the qualifying age.

Summary

The Liberal Democrats lead their offering with the promise to Stop Brexit, thus providing a £50 billion Remain Bonus.

They are generally supportive of business, although plans to increase corporation tax and income tax by 1% may not please potential voters.

Against that, a desire to favour small and medium-sized businesses, make the gig economy fairer and protect employees should generally be received more positively.

Find out more in The Accountant's Guide to Election 2019

Replies (18)

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By tacone
22nd Nov 2019 14:43

Where does the "remain bonus" come from? If we remain don't we have to carry on paying substantial EU budget payments?

So I am not sure how paying an ever-increasing budget payment results in us having additional cash to spend.

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Replying to tacone:
Hallerud at Easter
By DJKL
22nd Nov 2019 21:04

Continuing higher levels of economic activity leads to sustaining a higher GDP and accordingly a larger tax take is their argument.

It is pretty apparent that mere bare bones EU access will at the very least cause considerable damage to certain UK sectors, Economists for Brexit like Minford make this point themselves re both manufacturing and agriculture but it is likely the service elements of the UK economy currently trading into the EU will also see relocations due to conformity issues and cross border recognition issues, these will depress UK GDP.

The Brexit argument is predicated on the belief/assumption that over time these losses will be overcome, maybe longer term they will, but it looks pretty near certain that there will be a front end impact that will need to be caught up before, in economic terms, Brexit can be considered to have given us any financial benefit, how long that underperformance will take to catch up, if it ever gets caught up, is really unknown.

So what we do know is leaving with little cross border access to our nearest market will have a cost, that cost will likely initially be far greater than any sub we pay for membership, there is not, as far as I am aware, any credible economic modelling that has really ever said otherwise unless you have some to which you can refer that you wish to share.

This makes sense from an economic theory viewpoint, I for one struggle to remember too many strong arguments from university that convinced that placing barriers up helped trade (Except say Infant Industy arguments/national security arguments) and we know that countries tend to trade more with those nearer to them and less with those further away, maybe moreso in a world where the environment figures heavily within economic thinking and transport costs will increase in significance.

If we consider current trends with the growth of more powerful trading blocks and the erosion of the WTO this argument is even stronger today than it was in 2016 and will likely be stronger still in say 2025 onward.

Brexit is a case of valuing perceived sovereignty (perceived being the operative word because the stronger always control the weaker) and paying a financial price for that outcome, if you value that perceived benefit over the economic cost fine, embrace and accept that fact, but I for one cannot accept the to me spurious arguments of brexit enabling the UK unleashed in economic terms as it is just not borne out by any consensus view- if it were then on approaching our No Deal exit dates sterling would have strengthened, the fact it did not tells a story.

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Replying to DJKL:
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By SXGuy
23rd Nov 2019 19:46

A loss of GDP if we leave doesn't mean a gain if we stay. It isn't extra money on top of what we have now is it? So there is no extra money to fund those things if we stay, it will be taken from money that exists now.

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Replying to SXGuy:
By ireallyshouldknowthisbut
25th Nov 2019 10:50

@SX, id agree but i think its "compared to other parties"

So if you have one golden goose, and the plan is to kill it, then when comparing your spending policies against others its valid to say "+ we keep the goose's eggs"

Of course how many eggs the goose lays,and how much we get for them will be variable, but all serious goose experts say its better to have a goose than not have one.

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Replying to SXGuy:
Hallerud at Easter
By DJKL
25th Nov 2019 12:57

GDP is not money in the same way that Profit is not money, it is merely a measure of activity, Y= C+I+G +(X-M) being an expenditure approach modified by net exports/imports to enable measurement of same. Leaving the EU with a bare bones deal (and if in 12 months that is the best that will likely be achieved) will likely result in at best a stagnation of GDP but more likely a reduction (in effect a recession given the definition of a recession is two quarters of reduction in GDP- narrowly avoided earlier this year by the pre March spending boom- the over stocking exercise)

The big question I have for Minford et al is ,given say the destruction of UK livestock farming as an export business, which is what a bare bones deal with no cross border recognition re live animal health checking etc will result in, and as he recognises himself within his own Brexit analysis, what are we going to be doing in the Borders with our hills above the tree line, what impact will all this have to a sheep farm whose land has frankly little scope to be used for anything else ?

In effect re our contributions into the EU we can view them (from a mere financial point of view) as purchasing a discount card that is more valuable the more it is used and comes with some cashback offers, it is the pattern of our use that determines whether it is worth having it, given our existing pattern of use it makes financial sense and it only does not make sense if we are going shopping further afield, albeit we do need to consider the fuel bills if we decide to take that route.

Frankly I would have gone for some form of EEA/EFTA model (though possibly not joined with Norway but as a standalone parallel SPV) but instead what we have is HMG being driven by soundbites rather than any real appreciation of how our relationship within the EU operates, the net result is we are where we are with the most kneejerk politician one could imagine at the helm; what we need is a details PM what we are likely getting is Boris (I do not do detail) or very remote chance Jeremey (I am too stupid to understand the detail).

Am I glad I am nearing retirement age.

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By dstickl
25th Nov 2019 10:40

HaHaHa !

Anything about - ahem - IR35 ?

And then there's the Lib Den scandal - when in HMG - of as I remember it, that Jo Swinson (and/or saintly Vince) - when in the 2010 through to 2015 HMG coalition - cut the time to submit a Confirmation Statement to Companies House from the one month (of the replaced Annual Return) to a mere two weeks, which seems to me to be unduly SME-aggressive because a SME director/s may be away:
(A) abroad chasing business, or
(B) in hospital due to overwork, etc, or
(C) away on a well deserved holiday, etc !

Such stupidity, in my opinion, as exhibited by Jo Swinson, etc - now leader of the Liberal Democrats - and some of the rest of the Liberal Democrats, shows that they are unfit for HMG.

And I also remember that when my MP sent his formal MP's letter that challenged Business Minister Margot James MP, a former businesswoman, on my behalf about this BIS policy nonsense, he was fobbed off.

FACT: When I tried to electronically submit a Company Confirmation Statement to Companies House last month, the Companies House computer came back with the message implying that "It takes 5 working days for a Company Confirmation Statement to appear on the Companies House record" !

What a scandal, given that Parliament has cut the time to submit a Confirmation Statement to Companies House from the one month (of the replaced Annual Return) to a mere two weeks,

No wonder about the reality that some alleged "Parliamentary passengers" like those shy retiring MPs are quitting, after being challenged in some of UK's public places .

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Replying to dstickl:
By ireallyshouldknowthisbut
25th Nov 2019 10:52

Eh? The Confirmation Statement can be filed at any time. If you are late by 2 weeks nothing much happens.

It also appears on the record in about 2 hours normally so no idea why you are in such a lather over that minor bit of admin.

Whilst there is lot you can attack the Lib Dems for, this isn't one of them!

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Replying to ireallyshouldknowthisbut:
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By dstickl
25th Nov 2019 13:46

I disagree - the Lib Dems ran BIS in the coalition, & CS in only 14 d shows stupidity .

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Replying to ireallyshouldknowthisbut:
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By dstickl
01st Dec 2019 10:09

... furthermore: you really should know that - if you believe in the rule of English law in Rotherham, etc, England - then (in my humble opinion) you really should not write remarks that imply that the Lib Dem CS 14 days only to report madness (that some say is the Fib Dem CS 14 days only to report madness) is acceptable, because you also opine the rule of English law will be ignored by Companies House based in Cardiff Wales !

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Replying to ireallyshouldknowthisbut:
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By dstickl
01st Dec 2019 10:10

OK ?

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By dgilmour51
25th Nov 2019 10:58

"...along with efforts to support small and medium-sized businesses through alliances with the banking sector. "

As an example, RBOS's recent historic policy of 'gain by foreclosure' may or may not be currently in abeyance, and other banks may have more subtle methodologies - but the one thing you can rely upon is that they will leverage such politically naive 'support suggestions' to their gain and the detriment of the victims.
If the said 'alliances' are political alliances by political parties then they are worthless - if they are intended to be anything other than bank<>client relationships then they will amount to greater opportunities for banks to interfere with the sweet-running of businesses, inexorably and predictably to the businesses ultimate detriment.

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By Casterbridge Hardy LLP
25th Nov 2019 12:34

Yawn - roll on 13 December!

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By kjevans
25th Nov 2019 12:40

"Replace business rates in England with a “commercial landowner levy” based on the land value of commercial sites rather than their full capital value. The idea is to shift the burden of taxation from tenants to landowners."
Landowners will just sell or raise rents somehow - they can't afford to do anything else - I suspect that this would end up being worth less to small business than the current business rates regime (which reduces profit and therefore tax anyway). I'd like to see them succeed in taxing foreign companies. Not going to happen.

"Refund FE colleges for the VAT they pay."
Why? Many of then run commercial operations in catering etc and compete with local businesses

Looks as though many people will lose their zero hours contracts after 9 months, too.

Have any of these people actually run a business? Do they have a common sense department?

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By vstrad
25th Nov 2019 22:01

By definition, the country has exactly the number of shops it needs. You can't "save the high street" by keeping redundant retail premises empty instead of allowing them to be converted to much-needed residential property.

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By tacone
26th Nov 2019 10:54

I don't buy the premise that the EU won't do a deal if you look at the raw numbers The EU has a lot more to lose under WTO rules than the UK. This coupled with the loss of the UK budget contribution poses a real risk to the EU economies and has the potential to push them into recession. I don't think European leaders as opposed to the Commission will allow this to happen. I don't think this has been reflected in the UK's negotiating position up to now.

This is an extract from the Civitas think tank;

 Our analysis shows that if the UK leaves the EU without a trade deal UK exporters could
face the potential impact of £5.2 billion in tariffs on goods being sold to the EU. However,
EU exporters will also face £12.9 billion in tariffs on goods coming to the UK.
 Exporters to the UK in 22 of the 27 remaining EU member states face higher tariffs costs
when selling their goods than UK exporters face when selling goods to those countries.
 German exporters would have to deal with the impact of £3.4 billion of tariffs on goods
they export to the UK. UK exporters in return would face £0.9 billion of tariffs on goods
going to Germany.
 French exporters could face £1.4 billion in tariffs on their products compared to UK
exporters facing £0.7 billion. A similar pattern exists for all the UK’s major EU trading
partners.
 The biggest impact will be on exports of goods relating to vehicles, with tariffs in the
region of £1.3 billion being applied to UK car-related exports going to the EU. This
compares to £3.9 billion for the EU, including £1.8 billion in tariffs being applied to
German car-related exports.

I can't see the German car manufactures accepting a 10% WTO tariff on all their exports to the UK. That coupled with a fall in sterling will mean UK car imports from Germany falling significantly .

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Replying to tacone:
Hallerud at Easter
By DJKL
26th Nov 2019 14:38

I personally would start reading beyond "these" types of entities who have consistently peddled the "they need us more than we need them "meme, but of course you are free to read what you like, however this is wiki comment re Civitas.

https://en.wikipedia.org/wiki/Civitas_(think_tank)

"Civitas has been rated as 'highly opaque' in its funding by Transparify[24] and has been a given a E grade for funding transparency by Who Funds You?.[25] Its funders include the pro-free market Nigel Vinson Charitable Trust.[26]"

I personally tend more to read those with a bit more experience vis a vis understanding cross border trade issues, say more like Ivan Rogers, here is a link to his speech from yesterday that goes into some length describing the possible path re trade discussions if the Boris WA gets passed (i.e. the Conservatives win the election) and assuming the UK continues its previous shambolic approach to negotiating with the EU- it is of course , like the ghost of Christmas future, things that may come to pass rather than will come to pass, but does make sobering reading.

https://policyscotland.gla.ac.uk/ghost-of-christmas-yet-to-come-brexit-l...

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Replying to DJKL:
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By tacone
26th Nov 2019 16:28

I personally think that you have to pick your way through all the commentators, they are all biased in their own way and all peddle their own interpretation of the facts.

My own personal hope/view is that commerce will as it always has throughout history find a solution to the political mess.

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Replying to tacone:
By ireallyshouldknowthisbut
26th Nov 2019 16:52

Re the german car thing, stuff like this has been trotted out for several years along the lines of "they cant let this happen, the germans wont allow it"

But evidence of this massive political power of German Car manufacturers is yet to appear.

For the UK consumer, the existing drop in the value of Sterling is more important than the 10% tariff in any case, and presumably more if we have a hard brexit and the economy tanks.

From a EU point of view we have dicked them about for 3-4 years now, and with the Teresa 'deal', as borrowed by Boris, we have another 3+ years of the same. It has cost them a lot of time and money, and my view from people I speak to in the EU is everyone is fed up to the back teeth of us, and wants rid ASAP. I think its very naive to suggest we have much if any influence left in the EU, we are widely derided.

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