Pre-budget report: Taxes: Employers hit out as National Insurance hike raises job costs
0 Comments | Scotsman (Edinburgh, Scotland), The, Dec 10, 2009
Byline: Nathalie Thomas
BUSINESS groups accused the Chancellor of targeting private-sector employers when they can “least afford it”, after he announced a 0.5 per cent increase in National Insurance contributions from 2011.
Yesterday’s rise adds to a 0.5 per cent increase announced previously, meaning that businesses will have to shoulder a 1 per cent surge in contributions from 2011.
It is estimated that the measure, which will apply to staff earning over GBP 20,000, will raise between GBP 8 billion and GBP 9bn for the Treasury’s coffers, but business groups said it was extremely ill-timed.
Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: “It could lead to damage to Scotland’s skills base and competitiveness.”
Iain McMillan, director of the CBI in Scotland, said: “This is a tax on jobs at a time when the UK government should be making it easier for firms to employ people, and not more difficult.”
Experts said the changes to NI contributions were by far and away the most controversial of yesterday’s tax announcements, which saw several schemes extended, but few new incentives to help lighten the load on businesses.
Among the biggest winners of yesterday’s Pre-Budget Report were small firms, those in the biotech and pharmaceutical sector and – to the amusement of the House of Commons yesterday – bingo operators.
Small businesses now have an extra year before they will see their rate of corporation tax rise by 1p. The Chancellor boasted the move will benefit 800,000 small firms.
The government also threw its weight behind Britain’s science firms, announcing a 10p corporation tax on income that derives from patents in the UK.
Experts said the incentive will be particularly good news for Scotland, which has long nurtured its life-sciences sector. Bingo operators were also among the few businesses popping the champagne corks after bingo duty was slashed from 22 per cent to 20 per cent.
According to Richard Slater, of PricewaterhouseCoopers in Scotland, there were few bad surprises on the tax front for businesses, but “there was nothing to help them either”.
Retailers were relieved to see that VAT will not be extended beyond 17.5 per cent when the temporary 15 per cent rate expires in January. But few shop owners felt jubilant yesterday.
Giacomo Brescia, who owns Murray’s Tool Store in Edinburgh, said: “My staff and I had to spend two days to reduce our prices and will have to spend another two days to increase them again.”
Housebuilders expressed disappointment that the Chancellor chose not to extend the stamp duty holiday, which will come to an end on 1 January.
Ed Monaghan, the managing director of Mactaggart & Mickel, said: “The housing market has seen some moderate recovery, but nothing that would warrant the removal of that holiday.
“We would have liked to have seen it extended for at least another year to continue the momentum of recovery .”
There were some revisions to the oil and gas tax regime, but Derek Leith, head of tax for Ernst & Young in Scotland, said that they were “more a refinement” of the measures announced in the April Budget.