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Budget24: Just when you thought it was safe | AccountingWEB | photo of a shark fin and the sea
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Just when you thought it was safe

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Paul Aplin discusses the multiple stings in the tail of the Chancellor’s Budget speech, which started off slowly, but was back-loaded with more than enough announcements to keep the accounting and bookkeeping chattering classes going for weeks. Any answers? We’re going to need a bigger boat. 

6th Mar 2024
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I always have my Twitter (sorry, I still can’t get used to calling it X) feed open as I listen to the Budget speech. There are a number of people who I know will pick up on – and tweet - key points instantly. It is also a barometer of sentiment: is this an interesting Budget for tax and finance types or not?

The Twitter barometer seemed to be set at “dull” for a fairly long time today, with one of my favourite commentators posting a gif of tumbleweed rolling across a desert road. That seemed a fair appraisal at that point and I was just about to nip downstairs for a cup of tea when it all started to get interesting.

We all knew that we were in for a cut to national insurance (NI) – if that hadn’t happened the entire country would have had a claim for failure to deliver on legitimate expectations – but some of the other ideas trailed over recent days and weeks felt like nothing more than kite flying.

So much for tea

The first surprise was the increase in the VAT registration threshold. That prompted some interesting reactions on Twitter, from “great deregulatory measure for small business” to “can’t believe he’s done it – he should have lowered it!”

Another surprise was the tweak to capital gains tax, reducing the 28% rate for residential property disposals to 24% (the 18% rate for the part of the gain that sits in the taxpayer’s basic rate band remaining unchanged).

The abolition of the furnished holiday lettings (FHL) rules from 6 April 2025 will be deeply unpopular in some quarters, including farmers who have in the past been able to roll over gains and diversify into FHL properties.

Reactions to the high-income child benefit charge changes were mixed: positive in terms of the changes to thresholds but, with significant concerns over the idea of administering the charge on a household rather than an individual basis by April 2026. I am certain that this topic will continue to generate comment and disagreement.

Radical non-dom reforms

We certainly have some radical reforms for the taxation of non-domiciled individuals, with the introduction of a residence-based system from 6 April 2025. Individuals who opt-in to the new scheme will not pay UK tax on any foreign income and gains for the first four years of tax residence provided they have been non-tax-resident for the last 10 years. There will be some transitional rules, including rebasing the value of capital assets to their value on 5 April 2019 and a temporary 50% exemption for the taxation of foreign income for the first year of the new regime.

The government also announced the intention to move to a residence-based regime for IHT (and will consult on the best way to introduce this).

I foresee many, many articles ahead in the professional press on this topic.

In other news

Three things in particular caught my eye.

The first is the paper on the Cryptoasset reporting framework and common reporting standard.

The second is the paper on Raising standards in the tax advice market: strengthening the regulatory framework and improving registration.

The Raising Standards consultation sets out the three possible approaches to strengthening the framework: mandatory membership of a recognised professional body, joint HMRC – industry enforcement, and regulation by a separate statutory government body. It also explores approaches to strengthen the controls on access to HMRC’s services for tax practitioners.  I would urge every practitioner to read it.

On simplification, the government is announcing metrics to measure progress based in part on HMRC’s annual customer survey and will include HMRC’s estimate of the net change in cost to businesses of meeting tax obligations from tax measures.

Key numbers from the Red Book

I always like to look at the numbers in the Policy Decisions table in the Red Book. The cut in employee NI contributions has a cost of just under £10 billion a year and the cut in Class 4 NI contributions around £750 million a year. The cost of the HICBC changes is around £650 million a year and the extension of the fuel duty freeze is around £830 million a year. The changes to the rules for non-doms are expected to yield £2.8bn in 2026/27 and £3.6 billion the following year.   

There is a small amount of extra funding for HMRC to invest in debt collection capacity and digital and registration services, but many will be disappointed that there is no additional money for improving service delivery.

And finally

Trying to finish this brief overview after listening to the speech and speed-reading the Red Book and HMRC documents, this Budget feels far more like a busy road junction than a desert road with tumbleweed. I can do no better than repeat the Deputy Speaker’s words: “too much excitement”. Well, almost.

There was much in this Budget to occupy practitioners advising clients.

I suspect that the consultation on raising standards in the tax advice market will generate a good deal of discussion on AWEB over the coming months as well.

Time for that cup of tea. Or maybe something stronger.

Hear more from Paul Aplin who will be speaking at the Festival of Accounting & Bookkeeping on 13 and 14 March. Just seven days after the Spring Budget, FAB will have a full review on both days from esteemed tax experts including Rebecca Benneyworth, Paul Aplin and Emma Rawson.

Replies (5)

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Ivor Windybottom
By Ivor Windybottom
06th Mar 2024 18:38

The 'Raising Standards' consultation is potentially a good idea, but there are two glaring omissions: (i) staffing difficulties for accountants, with time spent on standards compliance potentially affecting our service/availability, and (ii) the absence of corresponding HMRC quality/performance standards.

Thanks (9)
Replying to Ivor Windybottom:
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By FactChecker
06th Mar 2024 20:51

Your 2nd point is why I suggested to HMRC, nearly 15 years ago, that they take on a role in 'recognising' the quality of a tax adviser/agent ... but they recoiled in horror.

Why? Because they'd spotted my 'hidden agenda' (or win:win as I preferred to think of it) - as in first they'd have to improve the standard/frequency of formal training in Tax amongst their own staff!

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Replying to FactChecker:
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By johnjenkins
08th Mar 2024 10:00

They wouldn't have needed to if they had stuck with "Agent Strategy".

Thanks (2)
Replying to Ivor Windybottom:
Should Be Working ... not playing with the car
By should_be_working
08th Mar 2024 12:50

The Raising Standards consultation sets out the three possible approaches to strengthening the framework: mandatory membership of a recognised professional body, joint HMRC – industry enforcement, and regulation by a separate statutory government body.

How short are the odds on option three being the chosen route, or at least the long term goal? Always rely on the bureaucracy to propagate itself.

Thanks (3)
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By Oxfoto
12th Mar 2024 12:37

Re. FHL - Unintended consequences?
Scrapping interest relief will certainly generate the revenue that Hunt so desperately needed but the consequences will potentially be disastrous.
The removal of this relief from long-term lettings pushed some landlords into short-term letting and others to leave the market altogether. The result of this was a) higher rents and b)fewer properties available.
If (as the cover story was told by Hunt) this measure was intended to make more properties available for long-term letting in areas such as Cornwall, it will fail. Owners will undoubtedly sell up and leave the market but their £0.5m to £5m houses are not going to be snapped up by first time buyers. The ancillary services that FHL’s employ (I.e. the very people who can’t afford current rents) will be out of work and the wider tourist-based economy will go into a slow decline.
Far rather that the Chancellor should have revisited the original relief for long-term letting and brought the rents down. That would have been a wiser strategy for growth. But then that of course is not his problem..

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