It is terrible when columnists say “I told you so” but this writer’s prediction that very little would come out of a Budget that had been timed to take place exactly five months before the biggest historical event in living memory was pretty accurate.
The Chancellor did talk about pulling rabbits out of hats but sadly, most of the bunnies appear to have been a little too canny and stayed firmly ensconced in the topper this time around.
To make matters worse, almost everything of import had been leaked in advance and therefore all Mr Hammond managed to do in 73 minutes was make a few bad jokes at the expense of the opposition, look rueful when reflecting that the Prime Minister had gazumped him on a couple of premium announcements and give a very strong hint that we will be in for a more substantial repeat come the spring, when the true national economic position has become at least a little clearer.
What should probably have been the most radical proposal relates to the introduction of a Digital Services Tax. This is designed to attack the multinationals trading online that do not pay their fair share of UK taxes (at least in the Chancellor’s eyes). However, on the surface, raising a mere £400m looks suspiciously like something concocted with the agreement of the big players in the industry as a means of providing a sop to the media and the public rather than taking the matter seriously. To be fair, this issue can only really be addressed properly at a global level.
A measure that will genuinely benefit almost everyone in the country is the acceleration in the increase in personal allowances and the higher rate threshold. This means that next April, a year earlier than planned, the personal allowance will reach £12,500 and the higher rate threshold £50,000.
As always, an assortment of abuses are to be attacked, many of which will not even have been noticed by most practitioners, let alone the public.
In most cases, the abuses will not mean anything to the man in the street or even the adviser in the street. There are two be limitations on profit fragmentation, VAT looping, VAT group planning and a number of other VAT scams. In addition, an entrepreneurs’ relief loophole by which companies could issue shares with little or no economic rights as a means to save tax is so pernicious that its abolition is to come into force from Budget Day.
A tightening up of the rules on R&D tax credits will clearly stop some who were using the system to enrich themselves unjustifiably but must also be expected to hit the innocent at the same time.
Perhaps more worryingly for those involved, in certain cases, directors will become liable for business taxes owed where a company deliberately enters insolvency to avoid or evade tax.
At a more personal level, tax relief on the sale of principal private residences has come under attack. In future, the lettings relief will only apply to those that have lived in the property with the tenants. In addition and rather perversely at a time when selling property is likely to become even more difficult, the exemption which allows the last 18 months of ownership to be regarded as a time of occupancy even when the owner has moved out is to be reduced to 9 months.
Sometimes, when listening to any Chancellor of the Exchequer one can get a very sense of déjà vu. Many of the changes had been announced already and others leave us back in a position that we had enjoyed in the past. One of these is the announcement that HMRC is to become a preferred creditor in insolvency. Unless this columnist’s memory is failing him, that was the position for many years until not that long ago. It makes perfect sense and this is only a surprise to the extent that the original, counter-intuitive change was made in the first place. However, the new legislation will not apply to taxes paid by business i.e. income tax or corporation tax as the case may be. The main advantage is therefore presumably likely to be derived in the areas of PAYE and NIC plus VAT.
Another measure that caught the eye was a ban on cold calling in connection with pensions. While this has to be good news for everyone but those employed making cold calls to get the hands-on funds released from pension funds it seems rather a strange thing to reveal in the Budget small print.
That favourite victim of all recent Chancellors, IR35 has hit the headlines once again. In 18 months’ time, the “off-payroll” rules already applying to the public sector are to be extended to private contractors but not small businesses. Quite why there will be different rules for large and small businesses is hard to fathom, since this will add considerably to the complexity of a tax regime that is hardly simple in the first place.
While this may sound like bad news for those in the sector, there had been an initial proposal that this would come into effect next year so they may be heaving a mild sigh of relief.
This is of necessity a mad dash through some highlights, if that is the right word. Those wishing to receive a full and detailed analysis of Philip Hammond’s Budget speech and all of the consequences should keep their eyes on AccountingWEB over the next few days.
Visit our at a glance guide for a summary of all the major measures from Budget 2018.
