Economy

Corporation tax rise will deter foreign investment, says MacIntyre Hudson

It is suspected during the March budget Chancellor Rishi Sunak will raise corporation tax to pay off the estimated £400bn borrowed by the UK throughout the pandemic

A rise in the headline rate of UK corporation tax could be the straw that “breaks the camel’s back” for any potential overseas investment, according to the head of corporate and international tax at MHA MacIntyre Hudson, Chris Denning. 

Denning believes that the government’s decision to raise the tax (which currently stands at 19%) could put off interest from forgein investors already “nervous about the post-Brexit environment”. 

The statement comes ahead of the March budget with reports suspecting that Chancellor Rishi Sunak will raise corporation tax to pay off the estimated £400bn borrowed by the UK throughout the pandemic.  

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However, the firm’s tax chief believes that Sunak should look to “stimulate enterprise and investment” instead. 

Denning said: “The UK needs a fiscal regime centred around international competitiveness now more than ever. The Chancellor should concentrate on growth and the way to do that is to create a vibrant economy. He needs to use his fiscal tools, like varying tax rates, in a positive rather than a negative way. 

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“We have good foundations in place already, with our foreign dividend and participation exemptions, R&D tax relief, Patent Box relief and the Capital Allowance regime. It is vital not to backslide on this as post-Brexit the UK is arguably now less attractive to overseas investors. “

He added: “With borrowing also currently very cheap, there is no need to pay for the pandemic in the short term. Corporation tax revenues are a relatively small part of the UK’s total tax intake (circa 6% in 2019/20) and total receipts have increased in recent years, despite the main rate being lowered in 2017 (from 20% to 19%).

“A rise in the tax rate, even if it raised more revenue, could not raise enough to compensate for the damage to the UK’s reputation for competitiveness.”

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