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.
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.
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.
No sooner was the ink dry on my first update when Boris announces a major change.
To recap, the 17% Corporation Tax rate by 2020 was in the Corporation Tax roadmap and had been passed in Finance Act 2016. So to freeze the rate at 19% is a significant change in Government policy. It also appeared to catch Cabinet Ministers unaware as one had been arguing that reduced tax rates increase revenues in a breakfast interview that morning.
The political logic of the move is clear. Boris is chasing constituencies in the Midlands, Wales and the North of England where spending on the NHS is more popular than tax cuts for corporations. He also deliberately wanted to get the policy out before the launch of the manifesto rather than have it overshadow the launch which is what happened to Theresa May’s ill-fated social care reform.
A number of cuts to business taxation are likely to be in the Conservative manifesto, namely:
- Increase in the employment allowance to £4,000
- A reduction in business rates for smaller enterprises
It is however notable that the employment allowance has been limited to companies with secondary NIC bills of below £100,000 so again the tax breaks to businesses are very much concentrated on the smaller ones.
A further announcement was made in respect of a tax on development gains so that development gains from planning consent will be shared equally between the local authority and the landlord.
In each of the tax rises, Conservatives can point that both Labour and the Liberal Democrats are looking for substantially larger increases in tax which means that those affected have no realistic alternative.
The dynamic of this campaign has so far been for significant public expenditure rises promised by all parties. We were expecting tax rises to be outlined by Labour and the Liberal Democrats, perhaps the surprise is that the Conservatives have also followed with some tax rises albeit not of the same scale.
Throughout the General Election, Primondell will do updates on the taxation policies of the major parties.
We are still in the stage before the manifestos are published so although there have been a considerable number of spending pledges already, confirmed tax policies have been thin on the ground.
Confirmed policies so far include Liberal Democrats increase in the Corporation Tax rate to 20%, cancelling the planned reduction to 17%. Increased Capital Gains Tax and Inheritance Taxes – scope undefined as yet.
Labour increased Corporation Tax to 26%, increases in Capital Gains Tax and an overhaul of Inheritance Tax which could see the return of a form of Capital Transfer Tax which will extend to all gifts even where the participant lives for more than 7 years after the gift is made.
Conservatives continue with the reduction of Corporation Tax to 17% in April 2020.
We should see considerable details once the manifestos are published.
What is abundantly clear is that the 2019 General Election will see a greater divergence between tax policies than has been the case since the 1992 election.
It was Louis XIV finance minister, Colbert, who famously said that the art of taxation was to extract the most number of feathers with the least amount of hissing. On that basis Inheritance Tax lamentably fails. It causes huge controversy whilst collecting only 0.7 per cent of all UK tax revenues.
On Monday 9th December MBL are holding a conference, which I am chairing, on Inheritance Tax. This conference will bring together some of the most experienced practitioners in Inheritance Tax in the UK. This conference is being held in London and should provide a very worthwhile review of the IHT system as well as practical solutions to IHT problems. It will also include some invaluable tax planning tips. Please contact MBL for details of how to book.
The Government had set up a plan to have one budget a year in the Autumn with the Finance Bill being published in December allowing for the bill to become law before the start of the next tax year.
However, first of all, there was the prorogation of Parliament and then the Government sought a general election which has so far which the House of Commons has not given assent. The anticipation was that there would be a budget by the new Chancellor in October or November, however with the election being postponed, it is unlikely to take place before a general election if that happens in the Autumn.
This does not mean that all tax changes are being put on hold, draft legislation has already been published for Finance Bill 2020 including significant changes to principal private residence relief, the introduction of a digital service relief and restrictions on the use of capital losses by larger companies.
Primondell will be keeping you briefed on significant Autumn tax changes as they are announced.