Choppy waters around Britain’s shores
It’s out with the old and in with the new at Treasury, although one familiar face remains.
Philip Hammond is joined by Elizabeth Truss as Chief Secretary, Mel Stride as Financial Secretary and Stephen Barclay as Economic Secretary.
While the post-election Cabinet reshuffle proved fruitful for Mr Stride, who takes on tax as part of his remit, the election result itself has done nothing to deliver either certainty or stability to the world of business and tax is no exception.
Time will of course tell what will be delivered in the Queen’s speech, but for the moment, it is fair to say there is turmoil in most areas of taxation.
And the question remains: how will Mr Stride and his opposites resolve their differences to bring much-needed stability to a pre-Brexit UK?
The Conservatives pledged to reduce the CT rate to 17% yet Labour wanted it to be raised to 26%. Will there now need to be a compromise? How can businesses strategically plan for the future without knowing what will happen next? How will businesses outside the UK be able to make investment decisions in the interim?
Whilst the main aim of the Tories and Labour was to freeze VAT rates, each of the parties put forward a different view on what should be VAT able, depending on whether the aim was to tax private school fees, boost tourism and leisure or remove VAT liability from Police Scotland and the Scottish Fire and Rescue Service. How will those proposals play out now?
Personal and Employment Taxes
The Tory pledge to raise the Personal Allowance to £12,500 may yet happen, but how likely is it that the tax rates will stay at the same levels as they are currently?
Uncertainty around the NICs piece is casting a shadow over employment as well as self-employment and it is not known whether the measures which Phillip Hammond set out in the Budget and then set aside will be resurrected. Labour ruled out aligning NICS, but it is clear that the tax gap in terms of decreased NICs revenues caused by the gig economy and increased incidences of self-employment needs to be addressed.
The business of IR35 and working in the public sector through an intermediary needs to be re-examined as the legislation around this has resulted in behavioural change by contractors but not necessarily in augmenting the Treasury coffers by increasing PAYE and NICs yield. The legislation is too complicated and as a result is unlikely to be adhered to.
Making Tax Digital
How likely is it now that MTD will be at the forefront of the Government’s agenda? Will the process carry on regardless or be placed on the back burner whilst other matters take priority? Some people might be happy with this eventuality, but it does nothing to decrease further fears of instability and uncertainty while it is sitting there, unresolved.
And what of Brexit? European leaders will no doubt be watching and waiting to find out exactly how the Brexit negotiations will be approached over the next few weeks – and who will be in charge of them – but the election result has done little to steady the boat and businesses will be likely to feel extremely uncertain about the future.
Will the Brexit date need to be extended to give the UK time to get its house in order? If so, further uncertainty will be on the cards.