SCOTTISH tourism bosses have warned the decision by the UK Government to press ahead with the rise in corporation tax “will be a burden too heavy to bear for many” following a Budget that was slammed for its lack of support for small firms.
Marc Crothall, chief executive of the Scottish Tourism Alliance, declared that the rise in corporation tax to 25 per cent from 19% in April “will be met with real concern and anxiety by many.”
It came as Scotch whisky distillers slammed the UK Government for pressing ahead with changes to the duty system, which will see spirits duty rise by 10.1% on whisky from August to £31.64 per litre of pure alcohol. That will mean duty and value-added tax will account for £11.40 of the £15.22 of the average price bottle of whisky.
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However, the Scottish Licensed Trade Association welcomed the Brexit pubs guarantee announced by Chancellor of the Exchequer Jeremy Hunt, which will result in duty on draught beer and cider in pubs becoming 11p lower than the duty in supermarkets.
The Mr Hunt said the move was possible because of Brexit.
The Scottish Tourism Alliance said the rise in corporation tax would ultimately lessen the amount the UK Government generates.
Mr Crothall said: “A significant number of businesses within Scotland’s tourism sector are currently on a cliff edge with the continuing rise in the costs of doing business, taxation, and impact of the cost-of-living crisis.
“Revenue is down, costs are up, and inward investment is impossible; survival is looking bleak. The increase in corporation tax will be a burden too heavy to bear for many, which will end up costing the UK Government more in terms of lost tax revenue.”
Mr Hunt’s budget contained a raft of measures that he said would deliver growth for the UK economy. These include a new policy of “full expensing” to replace the soon-to-end super deduction, which he said will mean that “every single pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits.”
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He described the move as a corporation tax cut that will be worth £9 billion a year on average while it remains in place.
The Budget included plans to help more people over 50 and the economically inactive to return to the workplace, and proposals for 12 new investment zones including one in Scotland.
The statement also included an “enhanced credit” to persuade more small or medium-sized businesses to invest in research and development, and there were commitments to ramp up the UK’s nuclear power capacity and invest in carbon capture and storage projects.
But Andrew McRae, Scotland policy chair of the Federation of Small Businesses in Scotland, said the Budget “doesn’t offer much practical help to smaller firms worrying about their costs and cashflow”.
Mr McRae said: “Many will be disappointed at a lack of headline measures to provide the immediate support they so badly need.
“There was nothing, for example, on business energy prices once the current support scheme stops at the end of the month.
“Neither did we hear anything about cashflow and tackling late payment – a move that would get money, money that’s already been earned, moving round the economy and working. One bright spot, though, was on fuel duty. Firms – especially those in our more remote and rural areas, or who need to travel the country to do business – will breathe a sigh of relief that it’s been frozen for another year following calls from FSB and others.”
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Sharon Blain, tax director at PwC Scotland, said industry and manufacturing in Scotland would benefit from the full tax expensing policy introduced by Mr Hunt.
Ms Blain said: “By rewarding investment in tech, plant and equipment, the Chancellor is playing to some of our real growth sectors north of the border.”
However, she said it was surprising Mr Hunt made no reference to the north-east of Scotland as he announced £20 billion of investment to develop carbon capture and storage projects across the UK, which he said would create 50,000 jobs.
Ms Blain noted: “This may lead people to renew calls for the yet-to-be-named Scottish investment zone to be positioned in the north-east, particularly following the announcement of Glasgow as one of the Government’s ‘high potential innovation clusters’ which will benefit from a share in £100 million of funding.”
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