Finance (No.2) Bill

Lindsay Hoyle Excerpts

Tuesday 8th April 2014 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I beg to move amendment 2, page 3, line 28, at end insert—

‘( ) The Chancellor of the Exchequer shall undertake a review, within six months of the passing of this Act, on the impact of an additional cut of one per cent to the main rate of Corporation Tax for financial year 2015-16, with particular reference to—

(a) the impact on businesses with fewer than 50 employees;

(b) the impact on investment by businesses with fewer than 50 employees; and

(c) alternative tax measures, including non-domestic rates, which would have a greater benefit for businesses with fewer than 50 employees.

( ) The Chancellor of the Exchequer must publish the report of the review and lay the report before the House.’.

This amendment would require the Chancellor of the Exchequer to publish a report on the impact of a cut of one per cent to main rate Corporation Tax on businesses, including small and medium sized enterprises (SMEs).

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to consider:

Clauses 5 to 7 stand part.

That schedule 1 be the First schedule to the Bill.

[Shabana Mahmood]

Our amendment would require the Chancellor to publish a review of the impact of an additional cut of 1% to the main rate of corporation tax for 2015-16 with reference to the impact on businesses with fewer than 50 employees, their levels of investment and the impact of alternative tax measures such as a reduction in non-domestic rates—business rates—which we believe would have a greater impact on small and medium-sized enterprises, which tend to be businesses that have fewer employees and in the main occupy premises with a rateable value of less than £50,000.

Our amendment and our approach highlight the difference between us and the Government when it comes to business taxation. The Government have made a number of significant cuts to corporation tax. The main rate has been cut a number of times, and is due to be cut again from 21% to 20% next year. The main rate is paid by companies with profits of more than £1.5 million—about 40,000 or so businesses. The small profits rate is paid by companies with profits of under £300,000, and there is a marginal rate, which applies to companies with profits between £300,000 and £1.5 million.

The Government have announced cuts to the corporation tax rate in almost every fiscal event that we have had since 2010, with the rate falling from 28% in 2010 to 20% in 2015-16. This has brought the UK rate lower than most developed economies. As I said, the Government are planning another cut for April 2015 from 21% to 20%, at a cost of £400 million in 2015-16, rising to £785 million the following year, and £865 million the year after that. The cumulative corporation tax cut over this Parliament has been in the region of £10 billion. The Government’s central argument for cutting corporation tax is that a lower rate makes the UK more attractive as a destination for businesses to locate. They claim that a reduction in the main rate of corporation tax will reduce capital costs for businesses and promote higher levels of business investment.