Tax

As the next United Kingdom general election approaches, the Labour Party’s business tax proposals are beginning to take shape.

On Thursday 1 February 2024, the Labour Party published a report entitled “Business Partnership for Growth”, timed to coincide with its Business Conference, where it was unveiled by the party leader, Keir Starmer, and his Shadow Chancellor, Rachel Reeves to more than 400 business executives. Whilst the publication covers wider economic policy, its contents include a number of specific proposals which, when read alongside the accompanying speeches, form the bones of a tax plan. Whilst the “plan” is currently short on detail, we now have clearer insight into the likely direction of travel for tax policy under a future Labour government.

A recurring theme is a focus on providing stability for businesses.

• The headline announcement – which came as a surprise to some – was Labour’s commitment to capping UK corporation tax at the current rate of 25% for the duration of the next parliament, although they did not rule out taking action if maintaining the current rate impacts the UK’s competitiveness.
• Research and development (R&D) tax credits will be maintained and stabilised by the use of 10-year R&D budgets and the introduction of a new Regulatory Innovation Office.
• Labour will retain “full expensing” (i.e., permitting a 100% capital allowance for qualifying expenditure on the provision of new plant and machinery) announced by Jeremy Hunt at the Autumn Statement 2023 (see Weil Tax Blog: UK Autumn Statement 2023: Tax Update).
• The Apprenticeship Levy will be reformed as a “more flexible” Growth and Skills Levy.
• There will be a single Budget event, held each November, in order to provide taxpayers and their advisors with time to plan before the next tax year begins.

Reeves confirmed that an incoming Labour government would publish a roadmap setting out its plans on business tax within its first six months of office, although the authors are hopeful that the party will release more details before then.

Somewhat conspicuous by its absence, neither the publication nor the accompanying speeches mentioned the taxation of carried interest. However, a spokesperson for the Shadow Chancellor later insisted that she remained committed to imposing the 45% rate of income tax in place of the current capital gains tax rate of 28%. Some senior figures within the Labour party are reportedly concerned that such a policy could deter investment in the UK and so this remains an area of uncertainty.

For further information, please see:

• https://labour.org.uk/updates/stories/labours-business-partnership-for-growth/
• https://labour.org.uk/updates/press-releases/rachel-reeves-speech-at-labours-business-conference/
• https://labour.org.uk/updates/press-releases/keir-starmer-speech-at-labours-business-conference/

If you have any queries around the proposals, please speak to your usual Weil contact.