Does anyone remember a Chancellor of the Exchequer called Philip Hammond? Seems that much has happened since he introduced the idea of an Autumn Budget and a Spring Statement to rationalise the tax raising and public spending announcements for the forthcoming fiscal years. It seemed a sensible thing to do and everyone quickly adjusted to it.
Subsequent events, as we know, have now turned things on its head and we’re back to where we started! The calling of a general election led to the cancellation of the Conservative Budget set for mid-November and we now face the prospect of a Spring 2020 Budget and spending forecast just before the start of the new tax year in April 2020.
Let’s take a look at some of the consequences of recent political events and how they could impact on the contracting industry.
Civil Service in purdah!
During the run up to a general election it’s impossible to get information from government departments like HM Treasury and HM Revenue & Customs. Work doesn’t stop in those departments but no announcements on policy or consultations are permitted. For contractors anxious to hear about the outcome of the review of the Loan Charge it’s going to mean a further wait until we have a new government.
Where is the Finance Bill 2020?
The legislation introducing the detailed rules around the introduction of off payroll working in the private sector from April 2020 has stalled. Many people are wondering whether this means there will be a delay in the implementation of the new rules. We think this is unlikely unless there is a political decision to do so. Incoming governments pay particular attention to finance bills to get them through as quickly as possible to maintain public revenues.
What tax changes might be delayed?
There are automatic roll-overs of the basic tax –raising mechanisms from year to year, but there is still a need to get a Finance Act in place to renew our annual taxes. Unfortunately there is no chance that Income tax, VAT, Corporation Tax or any of the existing taxes will not be rebooted from April!
What may be at risk is the possible introduction of measures such as the reform of Inheritance Tax and the Digital Services Tax aimed at the online multi-national giants. It’s unlikely that HMRC’s Making Tax Digital initiative, which affects VAT registered traders and is now well underway, will be materially delayed.
What could we have expected from The Budget That Never Was?
Budget predictions are rarely correct! 2019 was likely to have been no exception with the final predictions coming from the Conservative Party leadership campaign including:
- Raising the higher rate tax threshold for individuals from £50k to £80k
- Raising the National Insurance Contributions threshold
- Further reducing the rate of Corporation Tax – scheduled to go down to 17% in 2020
Other, less palatable rumours in the lead up to The Budget That Never Was, included a limitation of or even abolition of Entrepreneurs’ Relief which would have affected PSC contractors looking to close their companies and further pressure on pension tax relief.
What’s on offer now for the next Budget?
With a new government in place following the 12 December we would expect a Budget in January 2020 but we may have to wait until March 2020! Whichever date it is, what headline tax offerings are we being promised by the main political parties from their manifestos?
The Liberal Democrats are proposing an additional 1p on all Income Tax rates; Corporation Tax to be raised to 20%; Capital Gains Tax Annual Allowances to be scrapped along with the Marriage Tax Allowance.
The Labour Party are promising no increase in VAT; a crackdown on tax avoidance and evasion; new national levy on holiday homes; an increase in Corporation Tax to 26% by 2022; a 45% income tax rate on earnings greater than £80k and 50% on incomes over £125k; abolition of Entrepreneurs’ Relief and reduction of the Capital Gains Tax Annual Allowance to £1000 (from £12k).
Whilst the Conservative Party give us a promise not to raise Income Tax, National Insurance Contributions or VAT; to raise the NI threshold to £9,500; increase the Employment Allowance for small businesses; review and reform Entrepreneurs’ Relief and consolidating HMRC’s existing anti-evasion and tax avoidance measures and powers.
In summary
We think that, in this extraordinary year we can justifiably misquote, in part at least, Benjamin Franklin’s well known statement “…. has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”
