Autumn Statement 2016: ICAS reaction

UK parliament
By ICAS

23 November 2016

ICAS experts provide their reaction and analysis on key aspects of Chancellor Philip Hammond’s Autumn Statement 2016.

Anton Colella, Chief Executive of chartered accountancy body ICAS, said: “There is much in today’s Autumn Statement which will be roundly applauded in the boardrooms of Britain, but the elephant in the room remains the unknown consequences of Brexit. 

"The smile of business leaders today will be replaced by furrowed brows tomorrow, when we are all reminded that no one really knows what impact our exit from the EU will have on the bottom line and the wealth of the nation.

“The announcement that today’s Autumn statement is to be the last is something which ICAS whole heartedly welcomes.

“After the last Budget, we called for a simplification to the budget bonanza the government currently worked to. Scrapping the Autumn Statement cuts back on uncertainty for businesses which is even more crucial in the current economic and political environment we have found ourselves in over the last five months. This is a step in the right direction for the government towards making just two major budget statements across a five year term.

“Many CAs either have clients who are start-ups or they work in start-ups themselves. The announcement of a new £23bn national productivity and investment fund will help to foster the next generation of leading innovators that the UK is already world renowned. To quote the chancellor it will mean the government will be investing in today for the economy of the future.”

Tax changes affecting large companies

Susan Cattell, ICAS Head of Taxation (England and Wales), said:

“Large companies are critical to the UK economy. The Chancellor said that he wants Britain to remain the number one destination for business and acknowledged that certainty and stability are key. The reduction in Corporation Tax rates to 17% will go ahead. However, so will restrictions to loss relief for large companies. The changes to losses are complex and will mean affected companies revising their forecasts again. Companies may also be deterred from managed risk taking, which is vital for long term prosperity. The announcement states that steps will be taken to address unintended consequences and simplify the administration of the new rules so the details will be important.  

“Frequent, unpredictable tax changes are unhelpful for investors and could deter foreign investment rather than encouraging it. ICAS has called for a sensible balance between reducing rates and counterbalancing changes to claw back the tax reductions arising from reduced rates. It is disappointing that (in spite of the Chancellor’s acknowledgement of the importance of certainty and stability) large companies, which are vital to the UK economy, will have to deal with complex tax changes at the same time as managing the consequences of Brexit.  

“However, there is some good news for large companies.  Following the consultation in 2016 the government will make changes to simplify the rules for the Substantial Shareholding Exemption – removing the investing requirement and providing a more comprehensive exemption for companies owned by qualifying institutional investors.  

“As expected, the restrictions to interest deductions are going ahead – the UK government has taken the lead in implementing measures arising from the OECD BEPS project, of which the interest changes form part.  However, the government has announced that it will widen the provisions proposed to protect investment in public benefit infrastructure. Again the details will be important but companies will hope this will address some of the issues raised in consultation responses.”  

Making Tax Digital

Philip McNeill, ICAS Head of Taxation (Practice & Small Business), said:

“Whilst we had anticipated announcements on MTD, we welcome the delay to January 2017. This indicates that further time has been given to consider the significant input that ICAS and other professional bodies, and the wider business community, have contributed to the government’s consultative process.”

Income tax and National Insurance Contributions thresholds

Charlotte Barbour, ICAS Director of Taxation said:

“The alignment of thresholds is to be encouraged. Although we do note that there may be costs for employers, which adds to their overall burden.

“Employers already have significant payroll costs, which have increased over recent years, including employer NIC, auto-enrolment and apprenticeship levy.

“More importantly, the NIC threshold is not aligned with the income tax personal allowance. In effect, employees begin paying national insurance at 12% on their earnings above £157 a week (this equates to £8164).”

Tax avoidance and evasion

Charlotte Barbour, ICAS Director of Taxation, said:

“We note with interest that the Chancellor has referred to evasion, avoidance and aggressive tax planning. We believe the pendulum has already swung away from avoidance schemes.

“It would appear that the political drive is widening and we remain concerned that our members must be able to give proper advice to taxpayers. The muddying of waters is not helpful, particularly when new professional guidance has recently been issued.”

The consequences of devolution

Philip McNeill, ICAS Head of Taxation (Practice & Small Business), said:

“We welcome the Chancellor’s UK-wide approach. However, in the detail, it can be difficult to isolate what is UK spend and what is for England, such as the housing announcements and business rates.

“Of course, this Autumn Statement is part of the jigsaw for those who are Scottish taxpayers, who await the Scottish Budget on 15 December for the other half.”

A penalty for participating in VAT fraud

Susan Cattell, ICAS Head of Taxation (England and Wales), said:

"The government has announced that it will proceed with the introduction of a new and more effective penalty for participating in VAT fraud. ICAS supports further efforts to tackle Missing Trader Intra-Community (MTIC) fraud which continues to cost the exchequer between £0.5 billion and £1 billion per year - in spite of some HMRC successes in tackling it in recent years.  

"However, the announcement states that the penalty will be “applied to businesses and company officers when they knew or should have known that their transactions were connected with VAT fraud”. ICAS has called for the new penalty to distinguish between those who ‘knew’ and those who only ‘should have known’ they were getting involved in transactions related to MTIC fraud. There is a big difference between, say, an inexperienced trader (with no previous history of poor compliance) who does not carry out proper due diligence and hence gets involved in MTIC fraud inadvertently - and a persistent offender who knowingly takes part in a fraudulent series of transactions.

"The details of the new penalty will therefore be very important. ICAS believes it should comply with one of HMRC’s own penalty principles - which states that “penalties should be proportionate to the offence and may take into account past behaviour."


Autumn Statement Webinar: 24 November

BPP’s webinar will give you an overview of the main tax announcements in the Chancellor’s Autumn Statement and their implications. It will also give you the chance to raise questions with expert tax presenter Nitin Rabheru.

Find out more

Topics

  • Political landscape
  • Tax
  • Business
  • Accountancy
  • Brexit

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