The Chancellor appears to have taken pension tax relief reform off the table, but that doesn't mean Budget 2016 will be business as usual.
On 16 March AccountingWEB will be hosting a live chat during the Chancellor’s speech with a panel of tax and accounting experts on hand to react and analyse the key measures as they emerge.
Prior to the big day we asked our expert panel what they would like to see in the Budget and what they expect to see when George Osborne takes to the dispatch box on Wednesday.
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Jonathan Russell @ReesRussell
The Rees Russell owner and partner told AccountingWEB he would have liked to have seen some changes to pensions, in particular some balancing of the final salary schemes (mostly now civil service ones), and the contribution-based schemes. However, he said: “I doubt anything will be forthcoming and I would like to see help for small business over the costs of auto enrolment.”
When it comes to what he thinks we will see next week, he said: “A return of the fuel escalator, more aggressive moves regarding disguised remuneration (monthly dividends), an above-inflation rise of the basic rate tax band but matching with the top level for NI employee contribution.”
He added that he expects notice that the corporation tax final payment date will be accelerated progressively, along with an increase in the tax rate paid for CGT and entrepreneurs’ relief. “My guess would be a 50% discount of the gain but no special rate.”
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Steve Checkley @worcestersrce
TaxCalc’s Steve Checkley thought pensions would be one area the Chancellor might look at. “However”, said Checkley, “it seems from what I’ve read on the BBC News website is that there won’t be any announcements being made there.”
“On Making Tax Digital”, he continued, “I would like to think that it’s too early for any grand statements to be made in the Budget, largely due to consultation taking place very closely beforehand and with further consultation due to take place afterwards.”
He added: “With regard to Making Tax Digital actually hitting the statute books, we’re probably looking at Finance Act 2017.”
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John Stokdyk @JohnStokdyk
AccountingWEB global editor John Stokdyk explained that the Treasury has latched onto automation as its “big idea” for tax this year, which means that the Budget is going to go into digital overdrive.
“We're expecting to see up to four consultations around the Making Tax Digital project. There are two key points about digital transformation. First is the way that computerised systems tend to expand and absorb all the processes they come into contact with, so we're not just talking about personal and business tax accounts, but also universal credit, pensions administration and even the apprenticeship levy, all of which will be connected up to each other through the payroll/RTI reporting process.”
Stokdyk added that the second lesson to remember on Wednesday and beyond was flagged up this week when AccountingWEB member johngroganga reminded us of the fundamental data processing law, "Garbage in, garbage out."
He explained: “Connecting more and more automated systems and pumping gigabytes of new data types into a creaking and compromised structure is a sure way to increase the risk of a technology meltdown. I don't object to digital reporting, but I would hope that the consultation process will help inject some reality to the government's long-term digital plans.”
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Philip Fisher @bdoaccountant
BDO partner Philip Fisher said that given the downturn in the economy the Chancellor is going to have raise significant sums. However, he expects this to be a quiet Budget.
“There will inevitably be further measures to attack tax avoidance, although whether these are restricted to the kinds of highly artificial schemes that have been failing in the courts recently remains to be seen”, Fisher commented.
He added that in view of the media coverage regarding low tax rates paid by multinationals, further attacks on the big names in this field, along with banks, bankers and those in the utilities industries could also be on the cards.
“Given recent government grumblings, maybe Budget 2016 could also be the moment for the end of tax relief in connection with salary sacrifices?” he suggested.
“While the Chancellor has backed away from the fundamental pensions changes that he was mooting, there has to be the possibility that there will be developments in this area. I am not quite sure how it can be achieved but there must also be the possibility that Osborne supports the pro-European lobby as part of his government’s (at least some of it) attempts to ensure that the June vote keeps the country in the EU and his faction in office,” he said.
On what he would like to see on Wednesday, Fisher said real tax simplification would be his number one request.
“All too often the OTS makes sensible recommendations that are either ignored or implemented in such a way that they add additional pages to legislation without making life easier for taxpayers or advisers,” he said.
“If it were possible to make the right kinds of changes, not only would interested parties understand the tax system more easily but some of the loopholes that complexity brings. These have cost the Exchequer so much in recent years and might be closed forever, forcing those that have been taking advantage to take on what the public would see as their fair share of the burden.”
He added that the OTS has made some bold proposals with regard to the closer association of income tax and NICS.
“If Osborne wishes to leave a real legacy behind, perhaps this could be the opportunity to take big steps towards the ultimate goal of a single, unified tax,” Fisher said.
“Somewhat tongue in cheek, the 45% rate of tax seems a lot of hassle. Either it should be abolished, as a tax simplification measure or increased to 50% to make it worth the effort.”
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Della Hudson @Hudsonaccountan
On the Budget 2016 wishlist for Della Hudson of Hudson Accountants would be “true tax simplification”. In an ideal world she would like to see National Insurance combine with tax under the same rules and bands instead of different rules for different benefits.
She would like the threat of quarterly tax returns to be replaced by a simple requirement to make payments on account quarterly instead of twice a year. “We’d rather keep the cash ourselves but it is the admin which can cost more than the tax,” she said.
Hudson also called for the abandonment of auto enrolment and “all the expensive administration associated with that” in favour of an increase to employers’ national insurance.
When it came to what she actually expects to see in the Budget, she said: “Rumour has it that quarterly tax returns aren’t a mistimed April Fool, but will really be announced (perhaps not full returns but enough information to cause additional work and cost).
“I believe that these will have to be submitted through accounts software, so even Excel records will not be acceptable, let alone the beautifully accurate ledgers that one of my clients keeps.
“No politician will have the what-nots to apparently increase tax by combining tax and NI or increasing employers’ NI so small businesses will go under (or underground) to avoid the additional admin,” she added.
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Rebecca Cave @TaxwriterLtd
AccountingWEB’s consultant tax editor Rebecca Cave said she was intrigued to see how the Making Tax Digital magic was going to work.
She has plenty of questions on the topic that she wants answered: “Will the free software be able to distinguish between receipts for tax-deductible costs and personal items? How will the law be changed to require taxpayers to keep their accounting records in a particular digital form, and what penalties will there be for using paper or spreadsheets?
Cave added that we are expecting at least five consultation documents concerning Making Tax Digital to be released shortly after the Budget, including:
- The scope of quarterly reporting - exactly which data items will have to be reported and who will have to report
- The legal framework - how the law will be changed to require quarterly reporting
- Third party information - how third parties such as banks and land agents will be required to submit data in order to pre-populate the digital tax accounts
- Quarterly payments - how this will work
- Penalty regime surrounding quarterly reporting and quarterly payments
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Kate Upcraft @kateupcraft
AccountingWEB’s resident payroll writer said that in spite of all the weekend publicity, she thinks there will be some pension announcements in the Budget next week.
“Reform doesn't have to be about tax relief. There is a recognition that lower earners do not get the same level of tax relief and need to be treated fairly.
“One way to do that would be to put lower earners into some other scheme,” she said.
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Rebecca Benneyworth @rbeccabeneworth
Tax lecturer, writer and HMRC admin burdens advisor Benneyworth commented that “realistically we shall probably expect to see the personal allowances and higher rate threshold for 2017/18.
“In principle these have already been set, but it is likely that the Chancellor will want to go a little higher than the figures currently announced, so I will plump for a personal allowance of £11,400 and a higher rate threshold of £44,400, adding £1,000 to the basic rate band.
“He [the Chancellor] may take the opportunity to increase fuel duty, and in view of the price of fuel I wouldn’t be surprised to see the main mileage rate of 45p reduce to 40p – a useful extra bit of cash for the coffers.
“A real long shot is legislation to replace IR35 – if the Treasury has been able to come up with something.”
What are your Budget 2016 predictions? What’s on your wish list and what do actually expect the Chancellor to announce?
How many times will the Chancellor say the word “tax”? Take part now in the TaxCalc Budget sweepstake to be in with a chance of winning £250 in Amazon vouchers. Also register your details for Rebecca Benneyworth’s Budget 2016 report.