McDermott Comment I Tax Burden Hits its Highest Level for 70 years
Sarah Gabbai, attorney at law firm McDermott Will & Emery, said:
“To introduce tax rises in the next Budget would be too much too soon, particularly when many businesses and individuals are still struggling.
Corporation tax rises are convenient political headlines, but more often than not they end up causing more pain than gain. At a time like this, it would be far more sensible to introduce a temporary loss carryback to pre-COVID years. That way, businesses can obtain tax relief when they need it, and also become a potential source of tax revenue for the Government at a later stage once they become profitable again.
While aligning the capital gains tax rate with that of income tax would simplify matters by removing the need for many anti-avoidance rules, it could also be seen as turning its back on small businesses and the genuine entrepreneurship that goes into them were the Government to introduce such a move. It could also have knock-on effects for commonly-used management incentives such as EMI schemes, as well as the private equity industry, which already has a higher rate of capital gains tax for carried interest (28%) than the standard rate (20%). Given the current state of the economy, it would make more sense at this stage to review existing exemptions and reliefs across the board to ensure that they are being appropriately targeted. Any revenue gains from this exercise, if any, could (for example) go towards supporting those who missed out on CJRS and SEISS grants (such as owners of small businesses) and a temporary loss carryback.”