Theresa May’s decision to call a snap General Election may have come as a surprise to many, but accountants and business groups were quick to give their verdict on how this could affect the economy.
Budgets and Finance Bills
With one Budget behind us this year and another promised in November, it is unlikely that a third Budget in 2017 is high on voters’ wish lists, but this may be what they will get.
Even if, as predicted by many political pundits, the Conservative Party gains a larger majority it is not certain that the current Chancellor will be in post, particularly after last month’s climb-down over Class 4 NICs.
A new occupant of 11 Downing Street is likely to want his or her own Budget to address issues such as Brexit, productivity and the ongoing austerity programme, and there is recent precedence for an emergency July Budget following an election victory.
Tax expert and AccountingWEB regular Giles Mooney tweeted that a large majority could see a Budget after the election:
Yet another #financebill that will be thinned and rubber stamped. Big majority could see July budget. Keeps me entertained.
— Giles Mooney (@GilesMooney) April 18, 2017
Mooney also referred to the Finance Bill, which is having its second reading today. In its current form the largest Finance Bill in the history of UK tax legislation is unlikely to get through Parliament, which will rise on 4 May to start on the campaign trail. The Bill is likely to either be slimmed down to a few clauses to get it through or put it on ice.
Further tax considerations of the election include manifesto promises around tax. The ‘white van man’ controversy caused by the Class 4 NIC U-turn cost the government a huge amount of money, and they will not wish to be hamstrung by further tax locks or manifesto promises.
Any new election manifesto from the Conservatives is unlikely to mention tax locks at all, and may well do away with other locks such as the triple lock on pensions.
However, former pensions minister and Royal London's director of policy Steve Webb believes that the snap election has put the triple lock “up for grabs”.
“The Conservatives face a tricky choice now that Labour has pledged to retain the triple lock,” said Webb. “With inflation approaching 2.5%, the cost to the Treasury of the triple lock becomes relatively small. If the Conservatives were to decide to scrap the triple lock in the weeks before a General Election it would be a sign of supreme confidence about the likely outcome of that Election.”
Making Tax Digital
AccountingWEB’s consulting tax editor Rebecca Cave believes the election will further slow down the MTD juggernaut.
“There are a huge number of regulations that need to go through to make MTD work,” Cave told AccountingWEB. “They now cannot be passed while Parliament is not sitting - they’ll be put on ice. This isn’t a big problem in the short term because we’re not starting MTD legally until April 2018 – the MTD pilot is just experimental.
“However, for the more complex taxpayers – specifically corporations and large partnerships – we’re still waiting for the consultation documents. We’re not going to see them this side of the election, so from that point of view MTD for small businesses will carry on via the pilot scheme, but the rest of the MTD project may well be further delayed”.
Over on Any Answers AccountingWEB members saw the election as an opportunity to kick the scheme into the long grass through a concerted campaign of emails from accountants representing the SME sector.
On the thread Xero MD Gary Turner pointed out that MTD had already been politicised by Labour leader Jeremy Corbyn, who has threatened to scrap or pare down the programme.
A lot of focus around the UK’s Brexit negotiations has been around their impact on overseas trade. UK exporters have faced huge amounts of uncertainty around their business models, and international delivery firm ParcelHero’s David Jinks welcomed the announcement as giving UK exporters “a clearer idea of how Brexit will develop”.
Jinks also believes that whatever the result, Britain’s exporters will get a clearer picture of how things will develop in the long term. If the Conservatives win it will strengthen their hand in the forthcoming EU negotiations, while if an opposition party were to triumph it may enable the revisiting of the Brexit debate.
“While a re-run of the entire Referendum is unlikely, there may well be a greater emphasis on a soft Brexit,” said Jinks, “with compromises on immigration and other issues in order to ensure Britain remains part of the Single Market. This would eliminate exporters concerns over the impact of potential duties and taxes, not to mention long delays, at EU borders.”
What effect do you see the election having on your organisation? Or will it be business as usual?