Tax and the General Election
Susan Cattell outlines two aspects of the general election which have a particular impact on those working in tax.
What is pre-election purdah?
‘Purdah’ is the period immediately before elections when the activities of civil servants are restricted.
The Cabinet Office issues guidance for civil servants in UK government departments and non-departmental public bodies.
For the June 2017 general election, purdah runs from midnight on Friday 21 April. Three key aspects of the guidance for civil servants:
- civil servants should not undertake any activity that could call into question their political impartiality;
- activity should not be seen to compete with the election campaign for public attention;
- officials should not attend public or stakeholder events where they may be asked to respond to questions about future government policy or matters of public controversy.
Tax and purdah
From a tax perspective, one of the first obvious effects of purdah has been the suspension of meetings of MTD stakeholder forums and the postponement of a stakeholder conference.
The promised consultations on MTD for large and complex businesses are now unlikely to appear until after the election. It remains to be seen whether this disruption has any effect on the MTD implementation timetable or on the design of MTD; to some extent this may depend on the outcome of the election.
Other effects of purdah have been the deferral of other regular stakeholder forum meetings with HMRC and the need for conference organisers to replace HMRC speakers for events in the run-up to the election.
The programme of Talking Points webinars for agents has also been amended to remove topics which might involve policy issues; the remaining Talking Points cover purely factual matters.
What has happened to the Finance Bill?
Bills like the Finance Bill cannot be carried over from one parliament to the next. There is therefore a ‘wash up’ period before parliament is dissolved to agree unfinished business; dissolution of the current parliament takes place at one minute past midnight on 3 May 2017.
There is no time for the usual parliamentary scrutiny of bills so the Government and Opposition must reach agreement on bills (or parts of bills) that can be rushed through their remaining parliamentary stages and enacted before dissolution. Any contentious measures are therefore likely to be dropped.
ICAS called for most measures to be dropped from the Finance Bill because of the lack of time for proper scrutiny and debate. Charlotte Barbour, Director of Taxation, said “Rushing the whole Bill through is likely to result in poor legislation because there will be no opportunity for debate and no chance to make any amendments”.
This is essentially what has happened. A small number of clauses have survived, including rates of taxes and duties, the soft drinks levy, changes to IR35 for the public sector and changes to salary sacrifice.
The majority of clauses have been dropped, including major changes to corporate and individual taxation, such as:
- Making Tax Digital
- Corporate interest deductibility
- Corporate losses
- Changes to the taxation of non-domiciled individuals
And after the election?
In her introduction to the third reading of the Finance Bill Jane Ellison, Financial Secretary to the Treasury, said “a number of key policy changes to the tax system, such as measures to tackle tax avoidance, are not being proceeded with now, but will be brought forward in a Finance Bill at the first opportunity after the election”.
If this is what happens there will be welcome opportunities for proper scrutiny of major changes and the chance to secure amendments to tackle identified flaws in the legislation. However, it cannot be guaranteed.
There will be considerable uncertainty for individuals and companies affected by changes, where the intended implementation date has already passed.
For example, the changes to corporate losses and interest were due to take effect from 1 April and some changes to the taxation of non-domiciled individuals were due to be effective from 6 April.
Affected companies and individuals may therefore already have taken actions based on clauses in the Finance Bill which have now been dropped.
If the clauses are reintroduced and legislated after the election, any issues may be limited, but this will not be known for some time.