In the aftermath of the General Election what is becoming clear is that the appetite and ability of the Government to deliver further spending cuts has been greatly reduced. So if the Government is going to make progress in reducing the deficit then tax revenues need to rise. This was pretty much confirmed by Oliver Letwin MP.
Effectively there are only two ways this can happen; one is economic growth and the other is rises in taxation. If we rule out rises in the main tax rates as being too controversial and toxic, this leaves open a reduction in reliefs and allowances. These tend to be less politically explosive and the Government has deployed them increasingly since July 2015. There have been no protests on the streets against the reduction in interest relief for buy-to-let landlords.
The deluge of consultations in August 2016 will lead to further reductions in relief, notably in termination payments. The implementation of the Base Erosion Profit Shifting proposals will see further curbs on the ability to take interest deductions by large corporates.
The proposals on corporate loss relief will also increase the tax take to the Treasury. We can expect to see more of these as the Chancellor pursues fiscal consolidation. This will make for further complications in future Finance Bills as practitioners have to tackle the complexity arising from these changes.
Landlords, were the major target in the 2015-17 Parliament with restrictions on interest relief, increases in SDLT and the abolition of the wear and tear allowance. It may well be that the self-employed may see a focus on the tax take gap which is estimated at £4.5 billion. This could result in further tightening up on issues such as employment status.
Jeremy Mindell will be speaking at the CIOT conference on the April 2018 squeeze on Sunday 10th September in Warwick.
