An influential panel of MPs has called on Rishi Sunak to introduce tax refunds for any small businesses and the self-employed workers that have incurred losses due to Covid.
Ahead of the Chancellor’s Budget on Wednesday, the Treasury select committee recommended a ‘loss carry-back’ scheme.
Under this type of scheme, limited companies and sole traders would be able to offset any coronavirus losses against tax already paid in up to three previously profitable tax years.
These losses could then be carried forward into new tax years, reducing the risk of insolvency for businesses.
A similar policy was introduced during economic crises in 1991 and 2008.
A Treasury Select committee report also warned the Chancellor against significant tax rises at a time of fragile business confidence.
The report acknowledged that public finances are on an “unsustainable” long term path but argued that “now is not the time for tax rises”.
It is thought that the Chancellor may look to increase corporation tax from 19% to 25% and freeze income tax thresholds in order to address high levels of borrowing during the coronavirus lockdowns.
The Treasury committee chair, MP Mel Stride said: “Tax is often an area of significant disagreement between parties, so I am particularly pleased that the cross-party Treasury Committee has unanimously agreed this report for our Tax After Coronavirus inquiry.
“With our public finances on an unsustainable long-term trajectory, our clear message is that Budget 2021 is not the time for tax rises or fiscal consolidation, which could undermine the economic recovery. But we will probably need to see significant fiscal measures, including revenue raising, in the future.”
Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency said: “A system of tax refunds on coronavirus losses seems like the best of both worlds for businesses and the Treasury. Those businesses that are hit hardest by coronavirus will benefit most and, at the same time, the public purse won’t miss out on too much revenue because the majority will be recovered in years to come.”
Is your business struggling with the weight of the coronavirus pandemic? Speak to a member of our team about business insolvency support. Call: 0800 611 8888.