The date of The Budget has not yet been set but the speculation regarding its contents have already started.
This was always going to be the year of 2 Budgets as the previous Budget was postponed from Autumn 2019 until March 2020 because of BREXIT. In keeping with the new Autumn Budget timetable, the 2020 main Budget is due in November or December. The measures in that Budget will generally be enacted with effect from the 2021/22 tax year.
Given that the budget deficit for this year may be in the order of £300 Billion, many commentators believe that this will be a major tax raising budget.
I am not so sure. The economy needs stimulation rather than suppression. It also may not be clear by the time of the proposed budget whether tax rises are appropriate or not.
At present, The Treasury is doing its normal tactic of floating 10 tax raising ideas so that it can gauge the public and political reaction to them. Some of these ideas will never see the inside of a Budget Red Box.
Primondell will be doing a series of articles on the Autumn Budget 2020; looking at it from the economic, political and taxation perspectives. We will also be looking to host a number of seminars on the Budget, once the date has been announced.
Working from home has gone through three phases in terms of tax.
The pre-covid phase where tax deductions were difficult to secure as a result of a strict application of the wholly, exclusively and necessarily in the performance of duties rule.
Since the lockdown, HMRC significantly relaxed the rules on the ability of employers to pay working from home expenses including the provision of equipment. As the Government wanted everyone to work from home, this was not surprising.
The big challenge will come when the Government stops advising employees to work from home. Will the tax rules changes?
One should not ignore the human resource issues, the employment issues and the tax as employers get used to a new normal.
Jeremy Mindell offers a course which looks at both the HR and Tax issues that arise.
In the last economic emergency which followed the financial crash in 2008/09. Alistair Darling temporarily reduced VAT by 2.5% on all goods and services. This blew at least £12 billion in the accounts and did not do much good.
Rishi Sunak’s changes are by comparison targeted. The reduction in VAT in hospitality to 5% is at least targeted at the areas which have been most badly affected by Covid (except for airlines). Moreover, the reduced rate of VAT actually puts the UK in line with many other countries which levy a reduced rate of VAT on hospitality.
Even the 50% off measure for eating out is only from Monday to Wednesday which is traditionally a slow time for hospitality. Again, if it restarts or encourages the habit of people going out it would probably be worth the cost to the Treasury and it is only one month.
Finally, the stamp duty changes would appear to be in line with what was Government thinking before the crisis and may presage a wider reform of stamp duty where high rates have created a diminishing return for the Treasury.
Tax has made an unscheduled return to the media’s attention. With a large number of companies obtaining loans, grants and other support from the taxpayer there is increasing attention once again on the conduct of those companies.
Almost inevitably Margaret Hodge, former Chair of the Public Accounts Committee has become involved in this renewed controversy.
After the financial crash of 2008/9 it was mainly the banks under scrutiny as they were the ones that received the vast majority of taxpayer’s support. In the coronavirus crisis, support has been more widely spread and therefore any company which received government support can expect an increased focus on its tax affairs.
Primondell will be running a series of courses in the Autumn on Professional Conduct in relation to Taxation and Protecting your Client’s Reputation.
It has been reported that several companies’ attempts at obtaining emergency funds have been hampered by concerns regarding the owners’ activities in alleged tax avoidance. The optics of trying to secure taxpayer money whilst straining every sinew to avoid UK tax including becoming non-UK resident, are extremely difficult.
It is easy in tax planning to win a battle but lose the war. The rules of “the game “will change. If companies accept taxpayer funds, and, given the widespread nature of furloughing as well as other support—most have. In return, companies can expect greater public scrutiny of their tax affairs. Moreover, the boundaries of acceptable tax planning will shift—not necessarily to the taxpayer’s advantage!
After the financial crash in 2008/09, companies found themselves the target of hostile scrutiny in their tax conduct. I expect it to be the same in the aftermath of the Pandemic.
Primondell is running a series of seminars in the Autumn on Professional Conduct in Relation to Taxation (PCRT) and protecting your client’s reputation.
Covid 19 has pushed BREXIT out of the headlines but the issue has not gone away. As the talks recommence via video link, why is a comprehensive agreement on our future relationship seem unlikely to be achieved?
- The Johnson Government made some crucial changes to the Withdrawal Agreement; the most important was the dropping of regulatory alignment as a goal. The Government is prepared to accept some friction at the borders as a price worth paying to allow greater freedom to set the UK’s own regulations. Covid 19 has also made the impact of border delays due to additional checks much less of a concern, as health checks will be instituted anyway as the lockdown is eased.
- The impasse over fishing is difficult to see resolved without some major concessions from both sides. Fishing does not represent a large percentage of the UK economy but it is an issue which cuts through to the public and one where key constituencies may be affected.
- Covid 19 has eliminated the possibility of informal chats and behind the scenes face to face meetings, which are normally key to any breakthrough in talks.
From a Tax and Social Security standpoint, this more distant relationship is likely to create major changes in VAT, Customs Duties, Corporation Tax and international social security. Every business with trade across borders or international assignees will be affected.
Primondell will be running a series of courses on the tax and social security effects of BREXIT and the end of the transitional arrangements in the Autumn.
Chris Newell interviewed Jeremy and asked him If he thought whether we are likely to have income tax put up to 70% to pay for all of this.
Follow the link to the webinar to hear the interview with answers to this question plus many more https://lnkd.in/eEaTkyee
At the end of Boris Johnson’s first PMQs since returning to work, he confirmed what many had believed, that there would be no return to austerity to deal with the gaping hole in Government finances.
When Boris was Mayor of London he was not enthused with the austerity policies and now he is Prime Minister, he does not want them repeated. As I indicated in my Q&A session with Quantuma on the 1st May, there are three reasons why the Government was unlikely to repeat the austerity drive.
First, as evidenced by the result of the 2017 General Election, the public’s appetite and indeed acceptance of austerity has worn thin which is why no party was proposing this in the 2019 General Election. Secondly, the market for Government bonds has remained extremely buoyant with lenders prepared to accept negative interest rates to ensure security of their assets.
Thirdly, tax as a percentage of GDP in the UK has been creeping up towards a 40 year high and therefore the room for further tax rises without further damaging the economy is limited.
This does not mean that there will not be no tax rises. At the Q&A session I presented a list of tax reliefs that may be curbed to close the gap in the public finances. However, the main point is that major tax rises are off the table. The Government will be looking to close the gap with a rapid bounce back of the economy and growth that will increase tax revenues in due course, whether this strategy succeeds remains to be seen.
In the same way that it makes investing sense to buy shares when they are cheap and sell them when they are expensive, it also is a good idea to put in a new share scheme when the share price may have been hit by Covid-19.
First of all, it shows that you have confidence in your company. Secondly, it provides a powerful incentive to rebuild the value of the company and thirdly it allows a company to put more shares in a tax efficient plan than would normally be the case.
Share schemes are one of those projects that people talk about but often don’t get around to because of pressing day to day concerns. For those people stuck at home with time to think, this may be the opportunity to rethink your incentive arrangements and reap rewards in the future.
Remember Philip Hammond’s abortive attempt to increase national insurance for the self-employed?
He actually had quite a good case as the benefits being paid to the self-employed increased very substantially in 2016. That NIC rise was scotched by a Conservative backbench rebellion and the embarrassing fact that the NIC rise had been specifically ruled out in the conservative manifesto of 2015.
Move forward a few years and the Conservative manifesto in 2019 also ruled out increases in national insurance. However, at that point, there was no consideration of the self-employed receiving the substantial amount of support that they are through the Covid-19 crisis.
When Rishi Sunak announced this support for the self-employed, he made it clear that their preferential treatment for National Insurance as compared to the employed was no longer justified. One can therefore expect an increase in the Class 4 NIC amount towards 12%, aligning it with employees.
This is one example where Covid-19 will change the fiscal rules of the game, but these National Insurance changes will not be the last.