Businesses to pay ‘extra £4bn’ in tax, claims CBI

UK businesses will be forced to pay an extra £4.2 billion in tax over the next three years as a result of recent Government changes, the Confederation of British Industry (CBI) has argued.

The lobby group claims the loss of plant and machinery investment allowances and the abolishment of empty property relief is largely responsible for the projected ‘tax hike’.

Despite a 2p cut in the headline rate of corporation tax, the CBI predicts that UK enterprises will pay an extra £1.84bn in tax in 2008/9, £1.24bn in 2009/10 and £1.13bn in 2010/11.

According to the CBI, amends to the discrimination law and rules on consulting employees, which came into effect on 6 April, will also add to the financial pressure incurred by small firms.

John Cridland, deputy director-general of the CBI, said: ‘When the economy is slowing, the last thing a Government should do is raise taxes on the part of society which creates jobs and wealth, but that’s what’s happening.

‘The consequence will be that hard-pressed companies, which are already paying high rates of tax, will find life getting even tougher.’

Meanwhile, a spokesperson for the Treasury has insisted that other measures introduced by the Government will help boost British business:

‘The UK’s corporation tax rate [has been] cut by 2p to 28p – its lowest ever level, and the lowest of all major industrialised nations – and a new annual investment allowance will be introduced for all UK firms, providing a major incentive for them to expand or improve their business.’