In a year of so much political and, to a lesser extent, economic upheaval, it is likely to be of great relief to practitioners that the signs are that Philip Hammond is to refrain from treating the Autumn Statement like a second Budget
There are several reasons for seeking to scale back the role of the Autumn Statement, with simplification and stability chief among them.
Since Gordon Brown’s tenure in number 11 Downing Street, the Autumn Statement has seen the introduction of an enormous amount of substantive tax changes, which while allowing the government to quickly introduce measures, has served to keep the tax code in a state of near-constant churn.
With that in mind, advisers are suggesting very little tax change is in store when the Chancellor takes to the dispatch box.
It is unlikely, though, to be an address entirely devoid of tax modifications.
On personal tax, greater alignment of income tax and National Insurance Contributions is mooted, although the Office of Tax Simplification’s (OTS) historic desire to see them unified is very unlikely to be fulfilled given its political unpalatability.
Another area of personal finance that could draw examination, advisers suggest, is pensions. Hammond may decide to go where predecessor George Osborne did not and introduce a flat rate of tax relief to pension contributions at around 25%.
Such a move, says BDO tax partner David Brookes, would be relatively bold, but would play to the government’s ‘working for all’ mantra as the current structure sees most tax relief going to high and middle income individuals.
Business taxes
As far as business taxation is concerned, there are hopes among the business community that restrictions to interest deductibility could be pushed back.
The proposal, currently in consultation, forms part of the OECD’s Base Erosion and Profit Shifting (BEPS) project.
The proposal coming out of the OECD and G20 is there should be a restriction based on the level of EBITDA of the company, Alvarez & Marsal Taxand managing director Kevin Hindley told CCH Daily.
‘This will impact on all sorts of different groups, but of course if you have a loss one year then you have got no EBITDA and ostensibly no interest deductibility,’ he says.
Businesses have asked the Chancellor to defer the new rules until 2019, Hindley added, but as it stands they are currently scheduled to go on the statute books in April 2017.
‘We don’t have legislation yet, but we’ve been doing a lot of work over the summer modelling what it could mean for our clients based on the consultation documents, which contained detailed rules about how it would be implemented around a fixed ratio test and a group ratio test,’ Hindley said.
‘It’s a major concern and probably one of the most major changes we’ve had in my tax lifetime. The thinking behind the deferral is that with Brexit and all the uncertainty that it has brought about, do you really want a double whammy where you then hit a bunch of UK companies with a load of interest and an increased tax bill?’
While there is a keenness among business to see the move deferred, there is as yet little indication on the Chancellor’s appetite to acquiesce.
In terms of the government’s favourite theme of the last five years, tax avoidance, little is expected. If anything, BDO’s Brookes offers, Hammond may turn his sights to evasion.
‘The government has gone a long way down this road now, such that they’ve probably gone as far as they can on avoidance,’ Brookes says. ‘On the evasion side, some of the government stats have shown they’ve yielded £29 for every £1 spent. There used to be a project called Spend to Save: spend money on tax inspectors to save tax revenues. That’s a route they could go down, because they more than pay for themselves.’
