16 December 2015

  |  CBI Updates Team


Race to the top: developing a Corporation Tax regime to support sustainable growth

This is the third paper in the CBI’s Comprehensive Business Tax Roadmap series, setting out further steps which the Government can take to develop a Corporation Tax regime that supports productive investment and innovation.

Race to the top: developing a Corporation Tax regime to support sustainable growth

Read the ‘Race to the top: developing a Corporation Tax regime to support sustainable growth’ paper here

You can see coverage of our proposals in the Financial Times (£) 

The UK Government states in its Productivity Plan that “the tax system can support productivity by providing incentives, stability and certainty for long-term investment and innovation, avoiding distorting economic choices, and minimising the administrative burden of paying taxes.”

The business community could not agree more: a world-class Corporation Tax (CT) regime is an essential prerequisite to addressing broader economic objectives. First, it contributes revenues to fund the public services and critical infrastructure that a modern economy demands. Second, it helps to drive the investment and innovation needed to sustain growth and deliver prosperity for all.

In this paper, we commend the steps taken in the last Parliament to enhance the overall competitiveness of the UK’s CT regime. To lock in these gains, stability, certainty and clarity should be the watchwords to guide the Government’s thinking in this Parliament. 

Building on this, and to support the Government’s productivity agenda, we also outline some policy options that we believe would ensure that the UK CT regime better supports productive investment and innovation in the economy.  

Our Recommendations

To drive investment… To drive innovation…
1.    Maintain the structure of existing capital allowances in order to contribute to a stable environment for investment 5.    Maintain the attractiveness of incentives such as the Research and Development Expenditure Credit in the UK relative to international peers
2.    Keep the level of the UK’s Writing Down Allowances (WDAs) competitive relative to other nations 6.    Ensure that the UK’s R&D innovation incentives cover the full range of R&D activity from research through to development
3.    Broaden the capital allowances regime to cover structures and associated buildings
7.    Ensure that the benefits of worthwhile R&D tax incentives can be accessed by a range of businesses, particularly at the smaller end
4.    Improve the effectiveness of Enhanced Capital Allowances (ECAs) to ensure they deliver on policy objectives e.g. promoting investments in energy efficiency 8.    Allow smaller firms below tax thresholds to benefit from the R&D tax credit as they innovate, rather than waiting until the end of the year

9.    Tackle other significant barriers to innovation by smaller and medium-sized firms, including the costs of hiring high-skilled staff