A photo from the Liberal Democrats manifesto | AccountingWEB | Lib Dems target IR35, loan charge and CGT
Liberal Democrats

Liberal Democrats target IR35, loan charge and CGT in manifesto

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Some of the eye-catching pledges from the Liberal Democrats manifesto include putting an end to retrospective tax changes such as the loan charge, reviewing IR35 and closing capital gains tax loopholes. Philip Fisher highlights the proposals of interest to members of the profession.

10th Jun 2024
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In the run-up to the 2024 general election, the Liberal Democrats were the first party out of the starting blocks with a comprehensive manifesto.

Even they waited until less than three and a half weeks ahead of the big day before delivering a 22-section document entitled “For a Fair Deal”.

For those that are most interested in the political aspects, which are largely skated over in this overview for accountants, the full manifesto is available on the Liberal Democrats website.

While it may not have featured at the top of the document, the most powerful message that the Lib Dems have to offer comes in the business and jobs section when it states: “The Conservative Government has failed businesses and workers. Growth is minimal, productivity is slipping, and constant U-turns have badly damaged business confidence. Unfair tax hikes have further dented our prosperity, and our town centres and high streets are crying out for a fair business rates system.”

It currently seems unlikely but, should the party be elected to run the country, “our fair deal would give everyone the power to make the most of their potential, and real freedom to decide how they live their lives. It would call the over-powerful to account.” If only…

Business and the economy

Most accountants will inevitably focus on the chapter setting out policies regarding the economy.

This includes promises to attack the cost-of-living crisis, invest in green infrastructure, innovation and skills and “Repair the broken relationship with Europe”.

The industrial strategy includes incentivisation of business investments, job creation and the roll-out of giga broadband to every home and business in the country.

In response to recent economic upheavals (remember the brief tenure of Liz Truss and Kwasi Kwarteng?), the Bank of England’s independence and 2% inflation target are to be protected, while all fiscal events will be accompanied by independent forecasts from the Office for Budget Responsibility.

The party would also like to expand the British business bank, improve digital literacy and widen financial inclusion.

There is also a desire to attack one of the great bugbears of small businesses by tackling the late payments crisis and requiring all government agencies, as well as contractors and companies with over 250 employees to sign up to an enforceable prompt payment code.

Tax strategy

The headline commitments that will immediately strike a chord with accountants are those relating to taxation, which read as follows:

  • “Put an end to Conservative waste and give taxpayers real value for money, giving HMRC the resources it needs to properly tackle tax avoidance and evasion.
  • "Implement a tax policy that recognises how high the Conservatives have raised personal taxes, making the cost-of-living crisis worse, by instead focusing tax changes on reversing the Conservatives’ tax cuts for big banks and imposing a proper, one-off windfall tax on the super-profits of oil and gas producers and traders.”

There is a series of proposals to effect these desired outcomes.

The Lib Dems plan to work with international partners including the OECD and UN to tackle international corporate tax avoidance and strive for a minimum global corporation tax rate of 21%.

When public finances allow, they would like to increase the personal allowance. This promise sounds good but might seem worryingly vague to many, given the parlous state of public finances at present.

There is also a commitment to make the tax system fairer and raise money for investment by

  • Reversing tax cuts for big banks, restoring Bank Surcharge and Bank Levy revenues to 2016 levels in real terms
  • Tripling the Digital Services Tax to 6%
  • Closing unspecified capital gains tax loopholes
  • Introducing a 4% tax on share buybacks by FTSE 100 listed companies, to incentivise productive investment, job creation and economic growth

In a message that will put a smile on the faces of many accountants, there is a commitment to end retrospective tax changes such as the loan charge and review IR35 reforms to ensure self-employed people are treated fairly.

Although it features in the Business and jobs section, one of the most important tax changes for many small, high-street businesses is the idea of abolishing business rates and replacing them with a Commercial Landowner Levy.

Listed companies with over 250 employees will also be encouraged to promote employee share ownership, via Employee Benefit Trust structures.

There is a stated desire to boost R&D investment although this lacks detail and may or may not involve changes to the tax regime. Similarly, single malt lovers and distillers will be encouraged by the plan to review UK excise duty to better support whiskey exports.

Having recognised that the Apprenticeship Levy does little to promote apprenticeships, it would be replaced by a ‘more flexible skills and training levy’, while the Statutory Sick Pay system will also receive a welcome makeover.

Employment rights

The Lib Dems are keen to modernise employment rights “to make them fit for the age of the ‘gig’ economy”. To this end they would:

  • Establish a new “dependent contractor” status between employment and self-employment with basic rights such as minimum earnings, sick pay and holiday entitlement
  • Review the tax and national insurance status of employees, independent contractors and freelancers to ensure fairer and comparable treatment
  • For those on zero hours contracts, set a minimum wage that is 20% higher than the norm
  • Give zero hours and agency workers a right that could not be unreasonably refused to request a fixed hours contract after 12 months
  • Review pension rules in this context
  • Shift the burden of proof in employment tribunals regarding employment status from individual to employer
  • Expand parental leave and pay, making them rights from day one

A gauntlet thrown down

Now the Liberal Democrats have set out their proposals for the future, we only have a few more days to wait until the Conservatives and Labour offer their own alternatives. One fears that they may be neither as imaginative nor as generous.

Replies (9)

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the sea otter
By memyself-eye
10th Jun 2024 14:42

What about a super deduction (or should that be charge?) for politician's personal paddleboards?
More Lib-Dem nonsense.

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Replying to memyself-eye:
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By Justin Bryant
10th Jun 2024 15:50

But if you've read the MR, he (and I) was vindicated re the 2019 LC wasn't he? (Mind you, so was BJ for that matter - unlike tin ears TM and her sidekick PH). So it's good that someone is calling out HMRC for their gung ho attitude to retrospective legislation. That aside, it's also good that someone is calling out IR35 for the crazy nonsense it is.

If he'd have just similarly called out MTDfIT, we'd all be voting for them I'm sure!

I assume the so-called CGT loophole ("Fairly reforming capital gains tax to close loopholes exploited by the super wealthy") is 28% CGT on carried interest by PE types (which I believe is also Labour's policy).

[Update] Their CGT thingy is here (which looks a bit mad unless you reintroduce indexation allowance): https://www.theguardian.com/politics/article/2024/jun/10/lib-dems-capita...

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Replying to Justin Bryant:
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By Paul Crowley
11th Jun 2024 11:26

I read the Accountancy daily version from i-Croner
No really loopholes.
Their version stated current BR CGT rate as 18%. Glad I do not rely upon them.

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By Paul Crowley
10th Jun 2024 16:12

CGT loopholes?
Yeah right
Inventing another classification of working? Wonderful
Yet another variation of minimum wage? Who makes this stuff up?
Fairer and comparable treatment of the 3 classes of worker? That really will raise tax and NI, but ignore that Dividend tax is higher than NI and does not stop.

Easy to be generous when there is no chance that you need to deliver. But the Admin added to the system will wipe out any benefits if it were to come to pass.

Hope nobody thinks to try and copy or outdo it.

Thanks (3)
By ireallyshouldknowthisbut
10th Jun 2024 16:16

Hmm a 3rd form of worker is less than ideal as you just have more boundary issues, it would depend how you define it. It needs a "bright line" status to work.

Good luck with defining that. 25 years of trying to make IR35 work has utterly failed.

CGT is ripe for reform. Gains at marginal rate with indexation relief for property would do it. Very simple and removes a huge number of distortions.

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By FactChecker
10th Jun 2024 19:45

No real operational detail ... but then none of the parties provide that when issuing soundbites (sorry 'policy intentions') for consumption by the media AND there's certainly no need to worry about the practicalities when there's zero chance of being in a position to implement any of it!

Just one example: "three bands to be applied to taxable gains at different rates: gains between £5,000 and £50,000 taxed 20%; those between £50,000 and £100,000 taxed at 40% and those over £100,000 at 45%"
... so what about BADR?

Thanks (3)
Replying to FactChecker:
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By Paul Crowley
11th Jun 2024 11:28

Maybe BADR is one of the loopholes the would close.

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By C Graham
12th Jun 2024 10:20

So many reviews - all meaningless. The limp eu handshake dims and their leader who should have been forced to resign for his role in Horizon can promise nothing and deliver even less because it will never see the light of day.

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By pauljenkinsandco
17th Jun 2024 08:40

Who cares what the Lib Dems say - they haven't a change of getting in to power.

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