Commentators are predicting a continuing crackdown on aggressive tax planning as the most likely focus from a new Conservative government which pledged not to increase the rates of VAT, income tax or National Insurance contributions before it was swept to power last week with a 12-seat majority
Alex Barnes, tax partner at Irwin Mitchell, said: ‘The Conservatives pledged not to raise income tax, NICs or VAT until 2020 in their pre-election manifesto and David Cameron said this “five-year-tax lock" would be enshrined in legislation. Whether this was an empty pre-election promise remains to be seen but many have warned it could undermine Britain's fiscal credibility.’
George Bull, senior tax partner, Baker Tilly, said the pre-election announcement had effectively ‘padlocked’ the Treasury’s traditional levers for increasing the tax take. He predicted that George Osborne, newly confirmed in his post as Chancellor, could look at increasing the scope of taxes such as VAT, IHT or capital gains tax.
Although a further clampdown on evasion and avoidance is likely, Bull said: ‘Estimates generally exceed reality, and this is not a bottomless pot into which HMRC can dip its spoon.
‘If the tax gap figures are accepted, a 100% successful attack on evasion and avoidance would be unlikely to yield more than £20bn. Of course, the Exchequer has yet to fully benefit from all the measures introduced during the last Parliament to defeat tax evasion and avoidance.’
While high net wIndividuals (HNWI) may be relieved that the Conservatives will not bring in proposals such as the mansion tax, or increase the higher rate of income tax, they are likely to be hit by proposals to restrict tax relief on their pension contributions if they earn more than £150,000.
In addition, those who have opted for non dom status still face an uncertain future, according to Tim Stovold, head of tax at accountants Kingston Smith.
‘Non doms who booked their flights out the UK will be looking for refunds now that Labour’s suggested abolition of the non dom regime will not be taken forward. However, Conservatives will still be tinkering with the non dom regime so a period of uncertainty for foreign businessmen in the UK will continue for a little longer.’
Osborne has indicated he plans a second 2015 Budget ‘relatively soon’ in order to mark his return as Chancellor.
