Tax increases the Government may be devising in order to recover expenditure from dealing with the pandemic need to be cautiously measured. This would aid in preventing additional problems for the transport and logistics industry as they continue to fight with a tough market environment.
Reports circulating have proposed that Chancellor Rishi Sunak may be preparing to increase the rate of Capital Gains Tax (CGT), to potentially as high as 45%. Transport and logistics experts at Menzies LLP are suggesting that this could reduce entrepreneurial business strategies and make it tougher for businesses in the sector to invest in job creation and productivity developments.
Andrew Galliers, audit director, stated that:
“While some tax increases are expected, any decision to increase CGT above 38%, the current rate of tax that applies to share dividends, could have a devastating effect on transport and logistics businesses. Entrepreneurs would no longer have any tax incentive to invest in building up the value of a business in order to realise gains at the point of sale. The flow of investment into entrepreneurial businesses could start to dry up as a result, undermining the sector’s fragile economic recovery.”
To circumvent additional business problems, Galliers endorses a measured approach. He said:
“Transport operators are currently facing some major challenges due to soaring ocean freight rates and ongoing HGV driver shortages, and the pandemic is continuing to cause disruption across the world too. Further shocks for businesses must be avoided and any tax increases should be phased to minimise any collateral damage for the economy.”
In April 2023, the corporation tax rate is due to increase from 19% to a rate of 25% and prior to this in April 2022 a rise in the employer NICs by 1.25% is planned. Evidently, the tax environment for businesses in this sector is becoming more demanding.
Andrew Galliers adds: “For SMEs in particular, as headline rates of Corporation Tax and Employer NICs start to increase, it becomes even more important to manage inflationary pressures on the cost base carefully, to remain viable.”
“While plans to create eight new freeports, including tax breaks for employers, were announced to a fanfare in the March 2021 Budget, the sector is still in the dark about the finer details. More information on key factors, such as the location of tax and custom sites, is urgently required to enable local businesses to put plans in place and make the most of the developments.”