Rishi Sunak is mulling over multi-billion pound tax cuts for UK businesses that invest in property, plant and equipment in the wake of the coronavirus crisis.
The plans involve giving companies tax breaks on capital investments, such as machinery, in an attempt to stimulate economic activity and boost the government’s “levelling up” agenda.
Companies receive tax breaks on the first £200,000 of capital investment, with a temporary extension to £1m due to end in January.
The Sunday Telegraph reports that the chancellor is considering waiving the limit entirely for a period of time in what is know as “full expensing”.
The policy would aim to spur UK companies, particularly in the Midlands and the North, to ramp up investment and employ more people.
The right-leaning Centre for Policy Studies think tank earlier this year said such a policy “would mean businesses investing more, leading to higher incomes and more tax revenue”.
The move would be seen as a part of the government’s plan to “level up” large parts of the UK that have fallen behind due to de-industrialisation.
Downing Street in particular will want to focus on traditional Labour areas in the North and the Midlands that voted Tory for the first time in 2019, helping Boris Johnson win a landslide victory.
Speaking to the House of Lords earlier this year Sunak said there had been “a long-standing issue with investment in this country” and that “there is a general reason why one might want to try to encourage more corporate investment, and there is obviously a more timely one now if it might help to fuel a recovery”.
The news of potential tax breaks will come as good news for Tory MPs and members who have been concerned about speculation of potential tax rises in Sunak’s autumn budget.
The chancellor is said to be considering raising taxes on capital gains and inheritance as a part of a tax grab on the wealthy to help offset the hundreds of billions spent of pounds by the Treasury during the coronavirus crisis.