Firms facing labor force bomb: Biggest rise in 32 years comes on top of corporate tax hike
- The tax is linked to the September measure of the consumer price index (CPI), which came in at 10.1% yesterday.
- It will add £2.7billion to their bills, as will pandemic-era tariff relief for businesses such as shops, cinemas and bars, worth an extra £2.7 billion pounds, comes to an end.
- Property consultancy Gerald Eve said it was the biggest annual tax jump in 32 years
Next spring, UK businesses will face a multi-billion pound corporate rate bomb that could push many struggling businesses over the edge.
The tax is linked to the September measure of the consumer price index (CPI), which came in at 10.1% yesterday.
It will add £2.7billion to their bills, as will pandemic-era tariff relief for businesses such as shops, cinemas and bars, worth an extra £2.7 billion pounds, comes to an end. Property consultancy Gerald Eve said it was the biggest annual tax increase in 32 years.
UK businesses face a multi-billion pound bombshell in corporate interest rates next spring which could push many struggling businesses over the edge
Meanwhile, a rise in corporation tax from 19% to 25%, costing businesses £12.4billion in 2023-24, will continue while help with energy bills is reduced .
Employers can ill afford the raises on the brink of collapse as costs rise, interest rates rise and recession looms.
Jerry Schurder, business rates expert at Gerald Eve, said: “Businesses are shaking in their boots. Huge business rate hikes are not the way to grow our economy and attract foreign investment.
Altus, a commercial property group, said the rise comes at a time when, according to ONS data, more than one in ten businesses are reporting ‘moderate to severe risk of insolvency’. It calculates that unless the government changes course, a cumulative £25billion will be added to business bills over the next five years.
Robert Hayton, UK chairman of Altus, said it was time to end an annual rise in corporate rates and focus on driving growth to generate tax revenue. Alex Veitch, from the UK Chambers of Commerce, said: “There is a limit to the amount of additional costs businesses can absorb, and many are already reaching that tipping point.
“The UK economy is on the cusp of a recession and unless businesses are offered some form of relief, this could prove to be the straw that breaks the camel’s back.”
Retailers have long been calling for an overhaul of trade tariffs, which they say unfairly burden those with high street shops compared to online sellers.
The Retail Jobs Alliance, which represents companies such as Tesco, Sainsbury’s and B&Q owner Kingfisher, which together employ more than a million people, said there was an “urgent” freeze on rates, followed by a “appropriate reform”.
Martin McTague, president of the Federation of Small Businesses, said: “With the help of rates for many businesses ending in March, higher rate bills in April will be a hammer blow at the wrong time.”
He said it ‘risks deepening the vicious cycle of decline seen in too many of our towns and shopping streets’.
Kate Nicholls, chief executive of trade body UK Hospitality, said: “There is a real risk that hospitality businesses will face a huge cliff in April if these figures are used to raise the level of corporate rate taxation. .”
Goldman Sachs experts said raising corporate taxes – undoing Liz Truss’ plan to halt the rise – would lead to a deeper recession. A Treasury spokesman said a review of corporate rates last year had led to almost £7bn of support to reduce the rate burden over the next five years.
It also resulted in reforms making the system fairer, the spokesperson said. A report by consultancy Begbies Traynor yesterday showed that the number of companies in “critical” financial difficulty increased by 25% in the third quarter compared to a year ago.