It hardly seems worth the rigmarole of having a General Election this November when we already know what the outcome will be, unless Labour manage to royally shoot themselves in the foot between now and then.
Working on the assumption that we will have a Labour Government in charge of our finances and tax policies, I decided to take a closer look at what these policies might be and whether there was anything that caught my eye, and one of them did.
Rachel Reeves, the current Shadow Chancellor, thankfully seems to have her head screwed on and doesn’t appear to be making any wild promises that her party wouldn’t be able to keep (or afford) when they inherit our country’s relatively benign economic situation.
One of Labour’s ‘Tax Pledges’ that did catch my eye was one suggested in Labour’s Business Partnership for Growth plan, announced with much fanfare earlier this year in February. This particular ‘pledge’ suggests that a Labour Government would ‘Explore greater use of rulings and clearances for major investment projects – to provide more certainty to businesses of the tax treatment of the investment.’
This pledge is contained within Labour’s ‘Get Britain Building’ strategy, so a safe assumption is to assume such advance tax rulings might relate to major travel and energy-focused infrastructure projects, but also to new battery factories, renewable energy projects, and other large capital investment projects (such as data centres and life science / pharmaceutical R&D/manufacturing facilities), all of which fall in line with current Government Industrial strategy.
Advance tax rulings for these types of major investments are commonplace in other countries but are seldom seen or applied (save for certain niche asset classes applicable to our Capital Allowance regime) in the UK. But why do we care?
We should care for the following reasons:
- Brexit was meant to herald an era of huge inbound investment into the UK, giving us the ability to set our own tax rates and incentives (state subsidies) to attract foreign wealth and in turn become a powerhouse in life sciences, renewables, automotive, technology and other globally important sectors. This would in turn revamp our woeful levels of employee productivity. So far, this simply hasn’t happened. Whilst COVID hasn’t helped, neither has our current Government’s chaotic, ever-changing tax policies.
- The ability to secure and ‘lock in’ the long-term tax treatment of significant capital and / or revenue expenditure makes the fundraising process for businesses, investors and financiers so much more certain and less based on tax assumptions.
- Assuming a relatively smooth and efficient clearance process, a HMRC ‘stamped’ document, setting in stone the tax rates and reliefs for long term investment projects will carry a lot of weight and, as per point 2), help to secure the domestic and foreign investment we need to supercharge our economy and create the higher-skilled workforce needed to increase employee productivity.
We do not yet have a Labour election manifesto. However, we can expect to see the tax pledges that Labour has in some form already announced to be reflected in the manifesto when it is published – possibly over the coming months – alongside other plans it may have that address the gap left by the announcements in the recent Budget.
I think we are all agreed that the last thing this country needs is more uncertainty, populist tax policies and short termism, so I for one will be keeping a keen eye out for some further detail on this particular pledge.
