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21 November, 2016 - 13:35 By News Desk

Nervous of the Autumn Statement

Ensors Corporate Tax partner, Robert Leggett, and director, Katie Varney, discuss the forthcoming Autumn Statement following a tumultuous political year.

Robert: “Last year it felt like we had Budget overload, but somehow this year it feels a very long time since the March budget. We really seem to be entering a new world, with Brexit, Donald Trump on his way to the White House, not to mention a new Chancellor and Prime Minister.”

Katie: “I agree. It feels like so much has changed that it will be very interesting to see what Philip Hammond’s first mini-budget is like. There could be lots of changes as he abandons the previous attempts to balance the books in this Parliament and stamps his authority on things.”

Robert: “Yes, but rumours have it that despite this, the emphasis is still going to be very much steady as she goes.”

Katie: “Perhaps, but as this is effectively a new government, they are likely to have new priorities. It wouldn’t surprise me to see some major tax changes.”

Robert: “True. Certainly I have been topping up my pension in the last few months. The big pensions review was dropped in the build up to the referendum, but I could see that coming back now in an attempt to raise some short term revenues, so we could see the end of tax relief on pensions as we know it, especially for higher rate taxpayers.”

Katie: “Possibly, or it could be a two tier system, depending on whether you are under 40 and therefore young enough to qualify for the lifetime ISA.  What else do you think will happen?”

Robert: “Well, we pretty much know that there will be an end to most salary sacrifice arrangements. I don’t personally see how this is tax avoidance, as the individual is still being taxed on what they receive, but they seem to have become perceived as avoidance, and I expect them to go, except for very specific things such as childcare vouchers.”

Katie: “It may be too soon for really major changes, but it wouldn’t surprise me if the Government didn’t look at Inheritance Tax reliefs at some point.  Some would argue that you don’t really need Agricultural Property Relief when Business Property Relief is capable of protecting the working farmer.  Although it would be a revenue raiser for some, APR could be scrapped in the name of simplification at some point.”

Robert: “I have some concerns about capital gains tax, too. For a while we have expected some sort of restriction to Entrepreneur’s Relief to stop it applying to development land; perhaps that will finally catch up with us.”

Katie: “Do you think the 20 per cent rate announced in the March Budget will be under threat? That reduction caught everybody by surprise.”

Robert: “It did, but I understand 20 per cent to be just about the optimal level for raising revenues; much higher puts people off crystallising their gains, and I think 20 per cent is encouraging transactions; I’ve certainly seen that in the marketplace. So I don’t think this will be reversed, but I don’t think we will see CGT much lower for a long time to come. Something else I would welcome seeing is a further announcement on Making Tax Digital. It already sounds like the project will be put off until 2019 instead of 2018, but it still appears to add nothing but compliance costs for both the taxpayer and HMRC. It would be good to see major changes to the plans in this area, but I suspect we might have to wait for the March budget for this.”

Katie: “I think we will have to wait a while on that. I also don’t think we are going to see any big structural changes to tax in the next two years, such as the much talked about merger of income tax and NIC. The Government has far too much on their hands with Brexit, and not to mention the fact that if you were going to re-write the rulebook, you would need to know what sort of Brexit we will have, as that will determine how much flexibility the Government have.”

Robert: “Indeed, at the moment they have to be very careful of non-discrimination and freedom of establishment, not to mention state aid rules, and the fact that VAT is a European tax.”

Katie: “Exactly; if we stay in the single market, similar restrictions might apply.”

Robert: “Or if we have a hard Brexit then the government of the day might have a completely free hand with tax. Wherever you stand on Brexit itself, as a tax adviser that is a prospect which excites me and fills me with dread at the same time.”

Katie: “The 23rd of November will make for interesting viewing.”

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