PHILIP HAMMOND will deliver his first Autumn Statement as Chancellor of the Exchequer this week, looking to provide stability in the run-up to start of the Government’s European Union exit negotiations.
The economy is “faring better than many predicted” in the wake of the referendum, and his move to 11 Downing Street, said Andrew Spence, Head of Tax at EY in the Midlands.
He added: “As a result, he may look to ready many of the measures used during past times of economic shock but may opt to defer unleashing them until the 2017 Budget. This points to an Autumn Statement of hints, winks and suggestions, but with the real action to follow in the spring.
“However, with the roadmap of his predecessor beset by the roadblock of Brexit, the Chancellor has an opportunity to set out his own vision for the UK’s future direction of travel. Businesses long for stability that will allow them to evaluate their UK investment strategies and give the Government a platform on which to promote the country’s attractiveness.”
Here are 10 measures that are believed to be under consideration for this Wednesday’s Autumn Statement:
Supporting infrastructure “The Chancellor could consider various tax measures to boost infrastructure investment. These may include reversing the recent reduction in the annual investment allowance from £500,000 to £200,000. More substantively, we could see a systematic review of the incentives that the tax system creates towards investment, which could give rise to restoring relief for spending on industrial buildings and potentially going further.
“This pro-investment approach could also affect the proposals inherited from his predecessor, including providing exemptions from restrictions on interest relief for public benefit projects.
“The Government could revisit current plans to delay losses incurred in the early years of project construction being offset against income as the operations start to recover their costs. “Under these plans, tax would be paid well before businesses make an overall profit, potentially hindering up-front investment in large-scale projects.”
The tax rate “The Chancellor has said he intends to stick with the initial plan to cut corporation tax to 17% by 2020 rather than opt for the further reduction mooted by his predecessor. If he does have funds to spend, he could look beyond corporation tax to a reduction in the employment tax burden, such as reducing the rate of employer National Insurance (NI) contributions to offset the increase in the apprenticeship levy.”
VAT “A temporary cut in the rate of VAT to boost growth and spending could prevent prices rising due to higher import costs caused by the weakening of the pound. This would repeat the temporary reduction at the height of the financial crisis. However, consumer confidence appears to be solid so the Chancellor may choose to keep this up his sleeve for a later date.”
Disguised employment/IR35 “The new rules around disguised employment in the public sector are proving difficult to develop but could nevertheless be expanded to the private sector. This could affect many small businesses and mark a step-change in the direction of policy, driven by concern over losses from the Exchequer and a wider review of employment and self-employment.”
Tax administration “The attractiveness of the UK is not just about the tax rate, but also the way tax is administered. HMRC sorely needs to put more resources into the front line of dealing with large taxpayers to counter the complexity of the current tax system. The Autumn Statement provides an opportunity to target additional funding for HMRC, with a view to strengthening its Customer Relationship Manager programme. It also offers the chance to support foreign direct investment and buy time while the Office of Tax Simplification seeks to untie the Gordian knot of complex legislation.”
Tax avoidance “The Government will likely reaffirm its pledge to tackle tax avoidance. An update on this summer’s proposals to impose penalties on advisors is possible after the consultation on the plans recently closed. We can expect the Chancellor to reiterate the Prime Minister’s pledge that everyone must pay their fair share of tax. Individuals rather than businesses are likely to be the focus.”
Business rates “The forthcoming revaluation of properties for business rates purposes will see a sizeable shift in the geographic spread of non-domestic rates with London picking up a greater share of overall burden. Since the last revaluation, the Government has increased business rates by 20% while English property values have risen by 10.6%. Without a change in policy, this revaluation will lock in this extra tax burden, penalising property-intensive industries such as larger retail and manufacturing. The Chancellor may therefore seek to soften the impact, such as though targeted relief on plant and machinery for manufacturers.”
Salary sacrifice “Current plans on reforming the taxation of salary sacrifice schemes would, if implemented as proposed, undermine the effectiveness of the company car regime as an incentive to choosing low emission vehicles. We can expect the proposals to be changed and targeted elsewhere or abandoned.”
Entrepreneurs’ Relief “This relief is intended to encourage serial entrepreneurs to reinvest their successes into new ventures in the UK, but is capped at £10m over the entrepreneur’s life. The Chancellor now has an opportunity to reset the approach and apply it once per investment. This would encourage those who are particularly successful to reinvest, which would benefit the UK, employees and the economy.”
Holding companies “Building on the Britain ‘open for business’ vision, the Chancellor may also take the opportunity to modernise the rules for businesses disposing of shareholdings, to make the UK a competitive location for holding companies, particularly for fund investors.”
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The tax rate
