A recent survey has found that approximately 46% of medium-sized British firms intend to defer their investment plans following the increase in corporation tax last

month. This rise in tax rates has been criticized by businesses, who argue that it diminishes their motivation to invest and adversely impacts economic productivity and living standards.

In April, Britain's headline corporation tax rate climbed from 19% to 25%, as per the policy announcement made in March 2021. Accountancy firm BDO conducted the survey, which revealed that among businesses with a turnover ranging from £10 million to £300 million ($12 million - $379 million), 46% anticipated delayed investment due to the tax hike. Additionally, 39% stated that it would result in slower hiring or potential job losses.

In an attempt to mitigate the impact on investment, Finance Minister Jeremy Hunt announced in March that businesses would be allowed to immediately offset tax against investment in machinery and equipment, a measure known as full expensing.

Paul Falvey, a tax partner at BDO, remarked, "The recent rise in the headline corporation tax rate will dampen current business investment plans, although the positive reaction to the new full expensing capital allowances regime suggests this may only be a short-term effect."

Although Britain's overall tax burden remains lower than that of most European nations, it has gradually increased in recent years due to factors such as an aging population and sluggish economic growth. The tax burden is on track to reach its highest level since World War Two.

During the British Chambers of Commerce's annual conference, Minister Hunt expressed his desire to reduce taxes for businesses. However, he admitted uncertainty regarding the feasibility of such measures when the government is scheduled to outline its budget plans later this year.

The BDO survey gathered responses from 512 companies polled between March 30 and April 16. Photo by Paul McIlroy, Wikimedia commons.