We are set for an intriguing Autumn Statement from the new Chancellor. Even if George Osborne had kept his job, the Autumn Statement would have had to deal with the economic fallout from Brexit. Philip Hammond will of course make important announcements on this and has hinted at the potential need to 'reset' fiscal policy. That has been interpreted by some commentators as a hint that the government would tone down its commitment to spending cuts.
There is a wide expectation that there will be a boost for investment in housing and infrastructure and this may be good news for SME clients. He has stated - 'often it is modest, rapidly deliverable investments that can have the most immediate impact, particularly on the road network, but also in some places on the rail network'. There have already been announcements in early October of a £3 billion Home Building Fund. The press release on the fund stated - 'the fund will provide loans for small and medium enterprise builders, custom builders, offsite construction and essential infrastructure, creating thousands of new jobs in the process'.
What impact will any 'resetting' have on tax policies? There is an expectation that any additional investment will be funded by deferring the objective of eliminating the annual budget deficit by 2020. So we don't expect to see any changes to the tax rates and thresholds promised by the previous Chancellor, do we?
However most people who become Chancellors have built up a long list of 'good ideas' for tax incentives and, no doubt, the current Chancellor will not disappoint.
When George Osborne got the job in 2010, he cut corporation tax of 28% in 1% stages down to 24% and personal allowances started to be increased by significant amounts. CGT for higher rate taxpayers jumped from 18% to 28%. Alistair Darling was somewhat hampered by the need to cope with the 2007 subprime mortgage financial crisis, so we'll skip over him to Gordon Brown. In his first Budget, in 1997, he changed a fundamental part of the way in which dividends were taxed. Back then UK dividend receipts came with a 20% repayable tax credit. He changed the word 'repayable' to 'notional' with the result that pension funds were deprived of several billion pounds of tax refunds. Many commentators regard this change as a key nail in the coffin for private sector defined benefit schemes. He also cut corporation tax rates by 2% (the main rate fell to 31% and the small companies' rate to 21%).
So we'll see what ideas Philip Hammond has.
In addition, over the summer, HMRC issued over 30 consultation documents on potential changes to our tax system. There are some big themes being aired. Chief among these are the proposals related to the Making Tax Digital project. Six of the consultation documents cover different aspects of this project at the heart of which lies the desire to allow all personal and business taxpayers to engage with HMRC online and for taxpayers to see up to date and accurate information on their tax bills throughout each tax year.
Three of the consultation documents contain proposals to tackle the hidden economy. In 2013/14, the hidden economy 'tax gap' was £6.2 billion and HMRC are tasked with reducing the size of that gap. One of the consultations proposes that access to some business services or licences should be dependent on businesses being registered for tax.
Not all of these topics will make further progress in the Autumn Statement but a few will.
The media coverage of the Autumn Statement has grown over the years and sending information to your clients about the Statement and the prospective tax legislation is worth considering. Details of what we are offering can be found here.
The Chancellor will make his 2016 Autumn Statement on Wednesday 23 November.