Tory backbenchers heaped pressure on Jeremy Hunt today after he confirmed the rise in corporation tax at Wednesday’s budget.
The chancellor said the amount companies pay on their profits will increase from 19% to 25% – for those businesses with over £250,000 in profits.
The hike will kick in from April but has sparked criticism from Tory backbench MPs who want to see tax cuts.
Former prime minister Liz Truss attempted to scrap the policy in her mini-budget last September.
Boris Johnson is among a number of those who have previously hit out at prime minister Rishi Sunak’s plan.
The move is unlikely to go down well with big business or the free marketeers on the Tory backbenches.
Former home secretary Priti Patel led the charge in the Commons, asking the chancellor to keep the level of corporation tax “under review”.
She added: “Just on the issue of corporation tax, when it comes to the wider prospectus of the minimum rate of corporation tax…we know that the introduction of the minimum effective tax rate will be delayed in Washington and other countries, and I would just ask him again to think carefully about the timing of this. Why now?”
Former Tory cabinet minister Sir John Redwood told the Commons: “The government needs to understand that at exactly the time it’s putting the rate up, our competitors are going the other way.”
Ranil Jayawardena, who served as environment secretary under Truss, said: “We should still seek to revisit corporation tax in the months and years ahead because any increase in corporation tax will make us less competitive, reduce investment in the long-run, stifle job creation - all of which are required for growth.”
Jayawardena, who formed the Conservative Growth Group, added: “You don’t have to believe me, even the IFS [Institute for Fiscal Studies] says that this won’t raise the expected revenue. The increase in corporate tax won’t raise expected revenue that is currently suggested by some.”
Torbay Tory MP Kevin Foster added: “I am skeptical about just how much raising the corporation tax rate will actually produce in terms of actual income into the government.”
In a bid to soften the blow, Hunt also announced plans for “full capital expensing”.
The British Chamber of Commerce said the move, which will allow all investment expenditure to be set against revenue for tax purposes in the year it is spent for the next three years, was a “step in the right direction” to offset the rise in corporation tax.
The government claims full expensing is the equivalent of a corporation tax cut worth an average of £9 billion a year for the three years it is in place.