In this week’s Enews, we look at analysis of a potential increase to Capital Gains Tax at the Autumn Budget. There is also news on the government’s Make Work Pay legislation and the latest guidance for employers from HMRC to update you on.

• Raising CGT rates would not deter investment, says IPRR
• Make Work Pay threatens employment and growth warns FSB
• Latest guidance for employers

Increases to Capital Gains Tax (CGT) at the upcoming Budget would not deter investment into the country, according to the Institute for Public Policy Research (IPPR).

The think tank says that low CGT is not an effective way at encouraging entrepreneurship and investment.

Equalising CGT to income tax could help the Chancellor’s efforts to close the £22 billion hole in the public finances, with the IPPR saying doing so could raise up to £14 billion.

The IPPR said investors and entrepreneurs do not consider CGT when they set up a company as CGT only becomes relevant at the point of selling a business or assets.

The think tank claims low CGT rates are poor value for money, as they equally reward passive asset ownership and active entrepreneurship.

Finally, it says that unequal tax on income and capital gains encourages employees to act as ‘businesses’, creating labour market distortions.

The IPRR said:

‘Entrepreneurship and investment are vital to generating sustainable growth for the UK, but low capital gains tax is not an effective way at encouraging these activities. Instead, government and business must work together to make the most of the targeted support that is already on offer.

‘Closing the tax advantage on capital gains means that the system becomes more efficient whilst raising revenues to adequately fund the public services and investment that business across the country rely on.’

Internet link: IPPR website

The government’s Make Work Pay Bill lacks a pro-growth element and will increase economic inactivity, the Federation of Small Businesses (FSB) has warned.

The business group says that the legislation, particularly around day one dismissal rights, risks deterring small employers from taking a chance on someone who has had a significant period out of the workplace, shutting those doors and deepening social exclusion

It warns that the Bill is rushed and poorly planned while dropping 28 new measures onto small business employers all at once leaves them scrambling to make sense of it all.

There are already 65,000 fewer payroll jobs since Labour took power, and the new government is sending out a ‘troubling signal to businesses and investors’, the FSB adds.

Tina McKenzie, Policy Chair at the FSB, said:

‘The Chancellor has the opportunity to lead the way in adding a pro-business, pro-employment element to Make Work Pay in her upcoming Budget. This should include a rise in the Employment Allowance, pegging it to future rises in the National Living Wage. It should also include the reintroduction of the small business rebate for Statutory Sick Pay.

‘Sufficient time should be taken to avoid this becoming a hastily cobbled-together Act of Parliament. We look forward to more engagement and the start of a full consultation on each individual measure to ensure the voice of small employers is heard.’

Internet links: FSB website

HMRC has published the latest issue of the Employer Bulletin. The October issue has information on various topics, including:

• guidance for employers on RTI reporting obligations for payments made early at Christmas
• how salary sacrifice affects National Minimum Wage
• PAYE charge queries
• notice of change to effective date of new data requirements on employees’ hours
• the Administrative Burden Advisory Board – Tell ABAB Report 2024
• helping your employees prepare for retirement.

Please contact us for help with tax matters.

Internet link: Employer Bulletin