The forecast is for no major tax changes aside from changes to business rates as the UK tries to give stability to the economy for the upcoming Brexit discussions.
Leading up to his speech, most businesses are relatively relaxed because Hammond’s Autumn Statement contained several changes to the tax system including an increase
Hammond has moved to get rid of the Spring Statement permanently precisely because he feels too much fine-tuning is unhelpful for businesses. In addition, official figures show that UK’s levels of borrowing are also slightly lower than expected, giving the Chancellor more room to
However, Michelle Quest, head of tax at KPMG in the UK, is expecting a “boring budget” with no major structural changes and no relaxing of the government’s fiscal stance.
Bill Dodwell, head of tax policy at Deloitte, also hopes for limited changes. “We are in the middle of very substantial changes to the tax system, from Making Tax Digital, changes to employment taxes and changes driven by the G20/OECD Base Erosion and Profit Shifting project,” Dodwell said. “The move to a single, autumn Budget is welcome – which means that this Budget should not contain too many changes.”
Simplifying the UK’s tax system is high on many wish lists. However, business rates scrutiny may force the Chancellor’s hand despite hopes for a low-key budget. The UK’s present business rates system has been under criticism because of increases by many ratepayers.
"If the Chancellor wants to help ratepayers facing large increases, the fastest and most effective method is to adjust the thresholds of the Transition Scheme that
The government had hoped and planned that its first two budgets in 2017 would be a low-key affair, in light of the triggering of Article 50 to ensure a smooth transition. “These best-laid plans could be frustrated and we may see some significant announcements, not least on the thorny issue of business rates which has been the
Overall, Iain McCluskey,
The big tax themes that businesses can expect
For Mark Bevington,
- Measures to raise revenue and whether they will harm UK competitiveness;
- Measures to attract technology companies (both start-ups and the global major industry players), and how they will be balanced with the Government's apparent desire to modify the tax system to cope with new digital business models; and
- Further signals on the headline corporation tax rate in light of Brexit and the possibility of US tax reform.
Developing the gig economy will be a major focus for the UK and could feature in the Spring Budget. An increase in the tax burden of the self-employed is possible as the government looks to bring more of the gig economy into the mainstream tax system.
By focusing on the gig economy, which is changing the way businesses work, the government hopes that the UK will be better placed to benefit from the rise of e-commerce and ‘unicorn companies’. The Chancellor will usher in a review of the way the self-employed are taxed to sit alongside the consultation of the gig economy.
Withers’ Groves predicts that inheritance tax will be one of the hottest topics in the budget as the funding of social care in later life is prominent. “Equally, there is pressure for an increase in the nil rate band, which has been frozen at £325,000 ($398,937) since 2009,” Groves added.
In addition, business rate reforms and pressures on social care and funding are expected to be at the forefront of the budget.
The forthcoming rates revaluation has focused on the shifting of
“However, beyond a shift from one taxpayer to another, the revaluation locks in the significant increase in the burden that has been slowly introduced over time,” Sanger said. “The gradual increase in business rates each year above the rise in property values has led to the burden in aggregate that started at 41.4% of rateable value in 2010 rising to an expected 48% in the latest revaluation.”
Quest feels that tax changes must ultimately
RSM is confident that the announcements will include a call to open a consultation to decide the case and options for bringing into the UK corporation tax regime all non-resident companies receiving taxable income from the UK, because of an announcement in the Autumn Statement 2016.
No further drop to the corporation tax rate is likely – beyond the scheduled falls to 19% on April
“A 19% rate will give the UK the lowest combined (national, state and city) tax rate in the G20 but does come at a time when other countries have been reducing their own rates – at 9%, Hungary’s tax rate has now overtaken Ireland as the lowest in the EU. With the US considering proposals to reduce its national tax rate to 20% or even 15%, this trend will remain at the heart of competition for investment,” Sanger said.
“Despite the upcoming rate cuts, corporation tax receipts are predicted to grow, highlighting the importance of considering the tax base as well as the tax rate,” he added.
For indirect taxation, a few changes are predicted. RSM anticipates supplementary legislation for strengthening the ‘disclosure of tax avoidance schemes – VAT and other indirect taxes’, a potential extension of a VAT group to individuals and general partnerships, policy changes to the VAT recovery by holding companies, and an overall simplification of VAT by recommendations from the Office of Tax Simplification.
In addition, the withdrawal of
Ian Stewart, chief economist at Deloitte, forecasts good growth for the UK and “better-than-expected” tax revenues to provide Hammond with some good news ahead of this budget.
However, he noted that the long grind of public sector austerity has much further to run. Annual borrowing still accounts for 3.5% of UK GDP even after seven years of deficit reduction. This budget is not likely to see a change in this as the squeeze on public spending will continue to step up.
By the end of this decade, the tax burden is likely to be at a 30 year high, according to Deloitte.
So what does all this mean? George Bull,