Chancellor promises huge tax cuts but no change in VAT or business rates

A raft of new tax cuts and a £60bn energy support package has been confirmed by Britain’s Chancellor Kwasai Kwarteng as part of the government’s first mini budget.

Outlining aims to increase the economy annually by 2.5% the UK government has pledged a mixture of tax incentives and economic reform following soaring energy bills and a cost-of-living crisis.

The decision from the government makes up the Chancellor’s first budget unveiling, including widespread tax cuts to boost the economy, and confirmation that a proposed rise in corporation tax would be scrapped remaining at 19%.

The new measures mean that the UK will have the lowest rate of corporation tax in the G7 in a move that will seek to put £19bn into the country's economy.

Businesses will see the introduction of an energy bill relief scheme, which is set to cap wholesale energy bills for businesses for an initial six-month period from 1 October, costing an estimated £60bn.

It comes after the Prime Minister announced earlier this month that households would see domestic bills frozen at £2,500 in a bid to counter rising energy costs.

Despite tax cuts and greater borrowing from the government, there will be no adjustment on business rates or the level of VAT for businesses including those within the hospitality industry. 

It follows ongoing calls from industry leaders and business owners that without movement on these issues firms will continue to struggle as inflation and prices rise.

Kate Nicholls, CEO of UKHospitality, criticised the government's mini budget for not including wider reforms to VAT and business rate within the hospitality sector. 

In a tweet Kate said: "We urge Chancellor to build on the positive package of liberalisation and tax cuts for local investment zones and then apply the same principles to business rate reform - again highest property taxes in OECD - to unleash the potential of hospitality to support regeneration."

We urge Chancellor to build on the positive package of liberalisation and tax cuts for local investment zones and then apply the same principles to business rate reform - again highest property taxes in OECD - to unleash the potential of hospitality to support regeneration

— Kate Nicholls OBE (@UKHospKate) September 23, 2022

Criticising the government's objectives and interests, Sacha Lord Night Time Economy Adviser for Greater Manchester, said: "They have just sent a strong message to the Hospitality industry: They don't care. They have just thrown small family run businesses to the wolves."

He added in a seperate tweet: "Corporation tax cuts are completely useless if businesses aren’t turning a profit, or worse, closed. These announcements will now mean last orders for thousands of Hospitality businesses meaning mass redundancies."

Speechless.

No VAT or Biz Rate support for Hospitality.

Corporation tax cuts are completely useless if businesses aren’t turning a profit, or worse, closed.

These announcements will now mean last orders for thousands of Hospitality businesses meaning mass redundancies.

— Sacha Lord (@Sacha_Lord) September 23, 2022

Attacking the government's plans, the Night Time Industries Association announced they were "hugely disappointed" with the today's mini budget.

In a statement the organisations CEO, Michael Kill, said: "We have been extremely clear with the Government that the “#Energy Bill Relief Scheme”, even with the announcement of the limited tax cuts on National Insurance, Corporation Tax and Duty, is unlikely to be enough to ensure businesses have the financial headroom to survive the winter, especially with yesterday’s announcement of the rise in interest rates from the Bank of England."

He added: "I would urge the #Chancellor and Government to reconsider these measures, given the limited impacts of the current #tax cuts on the immediate crisis for many #businesses across the sector."

CONSUMER INCENTIVES

In addition, VAT-free shopping will be introduced for overseas visitors, while planned increases in the duty rates for beer, cider, wine and spirits will all be cancelled.

Alongside measures for businesses and households, the Chancellor announced that 40 new investment zones will be set up across the UK.

The zones will be allowed to reduce business taxes to help encourage investment in these areas. Stamp duty reform was also a focus of the mini budget.

The level at which house buyers start paying stamp duty will double to £250,000 to “support growth, increase confidence, and help families aspiring to own their own home”.

The threshold for first-time buyers will also be increased from £300,000 to £425,000, and the value of the property purchased by first-time buyers will be able to claim relief from £500,00 to £625,000.