Corporate tax roadmap only shows part of the picture

Ellen Milner, CIOT Director of Public Policy said:  

“This roadmap is a big signpost to companies of the direction of travel, highlighting areas of future focus and potential change within the corporate tax system¹. 

“It confirms that the government will not raise the corporation tax rate above 25% during this Parliament, that full expensing and the annual investment allowance are staying for capital allowances, and that there will be no change to the rates of relief for Research and Development (R&D). This should provide some much needed predictability and stability for companies.  

“However, the scope is narrower than we hoped for, with the roadmap’s focus only on companies and the corporate tax system, rather than all businesses. It is lacking in an overarching strategic approach to business taxation, which would include business rates (the consultation paper on business rates published today, although welcome, focuses on further changes to the existing business rates system rather than part of an overall holistic review of business taxation). This is a shame².” 

On proposals to the Capital Allowances regime, Ellen Milner said:  

“We welcome the areas to be explored in relation to the capital allowances regime, especially simplification, although the ‘slower timeframe’ for this is disappointing. Better is the promised consultation this year on the tax treatment of predevelopment costs, an area which has been causing difficulties in practice.  However, overall, the plans for capital allowances still seem to be another missed opportunity for a fuller review of the rules to ensure that the reliefs work effectively and deliver on the government’s overall strategic and policy aims. 

On Research and Development tax relief, Ellen Milner said:  

“The confirmation that there will be no change to the rates of relief for R&D is helpful. The roadmap recognises that R&D reliefs play a vital role in the government’s mission to boost economic growth.  But we continue to be concerned that HMRC’s handling of R&D tax relief compliance is resulting in valid claims being rejected and putting businesses through unnecessarily lengthy and costly enquiries. We welcome the announcement of a consultation on widening the use of advance clearances in the R&D reliefs, which could help here.”  

On the greater use of clearances, Ellen Milner said:  

“It is disappointing that greater use of clearances is confined to R&D reliefs, although we also note the government is proposing to develop and consult on a new process that will give investors in major projects increased advance certainty about the tax that will apply.  

“However, we note the limits in this commitment to large businesses and question whether there is an opportunity to think more carefully about how greater certainty can be provided for small business – especially given we know that this is the population accounting for 60% of the tax gap due to this group of taxpayers not getting things right.”  

Notes 

1. In the 2017 Better Budgets report published by CIOT, IfG and the IFS we recommended extending the road map approach. That report said that the Corporate Tax Road Map, produced in 2010, was a useful innovation. It also outlined a set of key principles that government should follow to make them useful. 
2. CIOT have been clear to ministers that more needs to be done to simplify the system, better understand and evaluate costs and administrative burdens both during and after the implementation of policy changes but it is not clear from today’s draft roadmap how this will be achieved. We wrote to the XST about the proposed road map for business tax in September 2024: CIOT letter to the Exchequer Secretary to the Treasury - Business Tax Roadmap