Autumn Statement: “Consistency” in the light of Brexit

WITH THE AUTUMN STATEMENT imminent, the chancellor is expected to keep “consistency” due to the uncertainty looming over Brexit.

There are certain expectations of what the Statement will reveal, and certain changes that accountancy firms and clients would like to see in the upcoming announcement.

Since the Budget earlier this year, not many changes are expected, although there has been and will continue to be damaged growth in the economy. Yet this is the first major fiscal event since the UK voted to leave the EU, and the UK markets await the result to spell out the direction of policy.

Ian Stewart, chief UK economist at Deloitte, said: “I’d expect this Autumn Statement to be short on the eye-catching surprises beloved of Mr Hammond’s predecessor, with the watchwords of dependability and consistency in times of uncertainty.”

However, Chris Grove, partner at Withers, added: “Philip Hammond may be tempted announce a raft of new tax measures to make a clean break from George Osborne’s tenure. He should resist. Above all things, taxpayers crave stability and certainty.”

Economic growth

The expected slow economic growth over the next few years may reduce the chance of the government “balancing the books” by 2020.

Michelle Quest, head of tax at KPMG, commented: “Expectations are for the UK economy to grow at a much slower pace. To ensure economic growth remains positive, the Government needs to indicate a willingness to use fiscal policy to stimulate growth and act to reassure business.”

Ian Stewart added: “The chancellor is likely to push the deadline for eliminating the deficit well into the next Parliament. This would give him more scope to lean against economic weakness by boosting spending, particularly through infrastructure and housing.”

From 1 April 2016, an extra 3% of Stamp Duty Land Tax (SDLT) was applied to additional residential properties such as second homes and buy-to-let properties. The changes have generated £670m, and some would like the announcement today to reveal a drop in SDLT.

Corporate Tax changes

Regarding corporate taxation, the UK has taken a lead through the G20 and BEPS project, already introducing measures such as better reporting and the removal of tax reductions for hybrid payments. Recently, corporation tax cuts and high-tech reliefs were outlined by Theresa May to the CBI prior to the release of the Autumn Statement.

There was a consultation on limiting tax deductions, with the original plan incorporating new limits from April 2017, raising over £1bn annually. Some businesses had asked the chancellor for these new rules to be deferred until 2019. Additionally, many businesses are willing to see their tax bills rise if it will mean a simplified tax system.

Bill Dodwell, head of tax policy, Deloitte, added: “We doubt that the chancellor will agree, although we hope that changes will be made to make it clearer that interest paid to third parties should always qualify for tax deductions.”

Making Tax Digital should be mentioned

With the recent news of the closure of consultations on the Making Tax Digital plans, some will expect to see MTD mentioned in the Autumn Statement later today.

Patricia Mock, personal tax expert, Deloitte, commented on MTD: “We hope that the chancellor will acknowledge that changes are needed to a project of this scale, and say as much at the Autumn Statement. We would like to see a road-map from HMRC, acknowledging that information providers will need several years to prepare.”

Chas Roy-Chowdhury, head of taxation at ACCA added: “If MTD for VAT is forced through while the UK is still subject to the common EU regime, then it will have to be designed to operate on the EU principles, incompatible with MTD interim reporting, and once implemented we will be stuck with an evolution of return-based VAT rather than a properly aligned consumption tax.”

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