Laurence Field is a Tax and Corporate Business Partner, comments.
Chancellor Hammond returned to the Treasury with a minority government and no real detail about the economic programme – what does this mean for UK policy?
Gone is any real prospect of radical reform and the government has no political capital to spare. With the chance of another election in the not too distant future, Hammond will likely focus his energy on popular measures. In the short term, a reintroduction of many of the measures from the last Budget that were cut when the election was called is on the cards, if only because he needs to be seen to be doing something.
Cracking down on perceived tax avoidance will be popular with all voters. Large business was in the firing line in March, so expect the interest and loss restrictions to make a comeback. On international matters the UK will continue to sign up to the Base erosion and profit shifting (BEPS) proposals, both to polish their anti-tax abuse credentials and show good faith in the Brexit negotiations.
Personal tax free allowances will probably go up, as will the higher rate thresholds – the timing might be accelerated, in the hope that people will feel the benefit before another General Election vote, possibly.
Mathew Taylor report on the employment law issues arising from the ‘gig’ economy will soon be published. Don’t be surprised if this gives political cover to align the tax treatment of employed and self-employed. Originally seen as a fund raising measure, there may be an opportunity to allow lower paid ‘gigers’ to keep more of their earnings – perhaps by imposing a new form of National Insurance on their ’employers’. With many government departments and the NHS reported to be struggling to get contractors after the introduction of the new IR35 processes, it might be pragmatic to defer the implementation of the new guidance for another year.
What about making tax digital (MTD)? Doubts were starting to be raised about the costs and processes prior to the election. Jane Ellison, the minister responsible for the MTD project, lost her seat. Perhaps a tactical post-election delay, would give the Government space to regroup. Pushing ahead with a project in which the smallest glitch will cause massive press comment, can only have downside with the electorate.
The new government wants to be seen to be competently getting on with the job. At this stage incremental changes will be the easiest way to show that to the electorate.