Spring Statement 2018: A damp squib or a slow-burning firework?
Michael Steed, Head of Tax for BPP Professional Development is hosting a one-hour webinar on 14th March 2018 to look at the new-style Spring Statement on 13th March. Here are his thoughts on the upcoming occasion.
The Chancellor of the Exchequer, Philip Hammond, announced last Autumn that the Government will respond to the forecast from the Office for Budget Responsibility (OBR) in a Spring Statement on Tuesday 13 March 2018.
It’s billed as a low-key event! The Government has said that it will be a much shorter statement, maybe only 15 minutes and will have “no red box, no official document, no spending increases and no tax changes”
The event on 13 March will set out updated UK economic forecasts, so we will probably hear about Brexit too.
Another way in which it’s being downplayed, is that it is on a Tuesday rather than the much higher profile Wednesday slot after Prime Minister’s Questions.
When Mr Hammond announced his plan to move the Budget from March to the autumn and the scrapping of the Autumn statement, he said “no other major economy makes hundreds of tax changes twice a year, and neither should we”. Despite improvements made since 2010, the government recognises that it can do more to improve the way that tax policy is made.
The move to a single fiscal event has been welcomed by economists and tax experts, including the International Monetary Fund, Institute for Government, the Confederation of British Industry, Chartered Institute of Taxation and the Institute for Fiscal Studies. A single autumn Budget will mean tax changes are announced well in advance of the start of the tax year in which they will take effect.
There will be more time available to scrutinise draft tax legislation ahead of its introduction and commencement. Businesses and individual taxpayers should face less frequent changes to the tax system, helping to promote certainty and stability. And there will be new opportunities for the government to consult with stakeholders at earlier stages of policy making, including by launching consultations at the Spring Statement.
The government believes that the move to a single fiscal event will help establish a more open, considered and professional approach, particularly in relation to the consultation process.
So, although it sounds like a non-event, there’s plenty going on in the background and some of it is very vote-sensitive.
The tax rules for contractors are probably one of the most sensitive tax issues at the moment. HMRC is gunning for workers who are engaging in false self-employment and in April 2017 introduced the new “off-payroll working” rules to tackle non-compliance in the public sector.
How will this play out in 2018? The Government knows it’s politically sensitive. This is what the Chancellor said at the Autumn Budget 2017:
- The government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017.
- Early indications are that public sector compliance is increasing as a result, and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company.
- It is right that the government take account of the needs of businesses and individuals who would implement any change.
- Therefore the government will carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the government and due to be published in 2018”.
Inheritance tax is also politically sensitive and the Government has recently asked the Office of Tax Simplification to come up with some ways to make IHT simpler and easier to understand
Making Tax Digital (MTD) has proved to be something of a millstone around the Government’s neck, but it is launching its first trial for MTD which is due to go live from April 19 for all VAT registered business, who will need to buy proprietory software to deal with this.
HMRC and the Treasury are also consulting on potential changes to the corporate intangibles regime and reforms to the administration and tax compliance in the light of changing attitudes to intellectual property (IP) and the government’s aim to reduce aggressive tax avoidance
But one of the biggest issues in tax right now is the imbalance between employment law and tax law for workers in the gig economy. We’ve had major employment cases such as Pimlico Plumbers and the Uber taxi drivers, that determine that for employment purposes we now have a third category of “worker” to add to the self-employed and employed categories, but we still only have two categories for tax: employment and self-employment .
I think we can reasonable expect there to be major changes in 2018 following the Taylor Report last year. So, there’s lots going on in the background!
We can’t know what the Chancellor will have in store for us on March 13th 2018. It may be a damp squib, or a slow-acting firework. But whatever it is, please join me for an hour at 13.00 online on 14th March to take a look behind the scenes. Look forward to talking to you.
To join Michael for this free webinar, please register here: http://bit.ly/2sIvFO0