What does the Spring Statement mean for accounting and finance professionals?

What does the Spring Statement mean for accounting and finance professionals?

Fiscal Phil returns to deliver his Spring Statement just two weeks before Brexit day

In a nutshell

Fiscal Phil returned today to deliver his Spring Statement, just two weeks ahead of B-day.

He pointed out that the UK economy is continuing to grow, including increasing wages and unemployment falling to its lowest rate in recent years.

Hammond set a positive tone for growth in the post-EU exit era, announcing investments in infrastructure, housing, clean growth, technology, and skills.

In a bid to tackle crime in England and Wales, the Chancellor also announced that £100 million would be available to police forces in the most affected areas.

Key takeaways

The Chancellor’s key changes were particularly prevalent in the following areas:

1. The Economy

There has now been nine years of consecutive growth and business investment is expected to start growing once again next year when businesses can leave behind the uncertainty Brexit has brought.

2. An open and competitive UK

The government is strongly hammering the message to the world that, as the UK ceases to be a member of the EU, it continues to be open for business. Key changes which support this include citizens of the US, Canada, New Zealand, Australia, Japan, Singapore, and South Korea being able to use e-gates at UK airports and Eurostar terminals from June 2019 and the fact landing cards will be abolished from June 2019.

3. Technology

Further changes to support innovative science and technology to further grow the economy and create jobs were announced.

Hammond today welcomed the Furman review, independently looking into competition in the digital economy and hoping to tackle the fact some tech giants have become very dominant. Other funding is going towards new inventions to further scientific discovery, including £81 million in Extreme Photonics, which is state-of-the-art laser technology, £45 million on Bioinformatics research in Cambridge, and £79 million on a new supercomputer built to be five times faster than anything in existence now.

4. Clean growth

The Spring Statement has built on the last Budget’s commitment to a cleaner economy via Industrial Strategy, Clean Growth Strategy, and a 25-Year Environment Plan.

This includes the government introducing a call for evidence on a Business energy efficiency scheme. It will also advance decarbonisation of gas supplies by upping the proportion of green gas in the grid, which will in turn help to reduce dependency on burning natural gas in homes and businesses, among many other new initiatives both for individuals and businesses.

5. Housing and infrastructure investment

To continue with this government’s ambition of raising housing supply to its highest level since 1970 by the end of this parliament, Hammond announced more funding and other initiatives in the coming months.

£717 million from the Housing Infrastructure Fund will unlock up to 37,000 homes at sites including Old Oak Common in London, the Oxford-Cambridge Arc, and Cheshire. Up to £3 billion in borrowing will be guaranteed to housing associations in England to support the delivery of about 30,000 homes.

What does this mean for accountants?

In the shadow of another rejected Brexit deal, it is unsurprising that very little tax changes were announced in the Spring Statement.

Stella Amiss, head of tax policy at PwC, said: “While the economic message was robust, the door has clearly been left ajar for a possible summer Brexit Budget.

“The Chancellor was at pains to stress the importance of an updated regulatory model that will deliver for a Global Britain in the digital age. It’s a shame no such acknowledgement was made of the need to overhaul a creaking tax system to support modern ways of working and doing business, let alone those that will follow in the future.

“This was a speech very much aimed at future generations. But while technological advancements continue apace and the ways in which people wish to work constantly evolve, our tax system will find itself lagging behind. We did see a nod towards a continued commitment to the UK Digital Services Tax, but what is ultimately required is the start of a conversation to address the fundamental issues within our tax system. There’s only so long we can keep kicking the can down the road.”

For Adam Jackson, director of Public Affairs at Grant Thornton, the statement saw Hammond “pleading for certainty and putting off decisions.”

Jackson said: “Sitting in the shadow of last night’s defeat of the Prime Minister’s Brexit deal and tonight’s vote on no deal, this was always going to be a very low-key Spring Statement. The Chancellor took it as a political opportunity to press home his own views on Brexit.

“Philip Hammond began by warning of the ‘dark cloud’ of uncertainty hanging over the economy; he went on to warn of the economic disruption caused by a no-deal Brexit including a hint that the risk of inflation could limit the scope for any fiscal stimulus. He held out the prospect of a Spending Review that would finally end austerity, provided there is a Brexit deal, and he used the end of his speech to make a seemingly personal pitch to MPs to rule out no deal, extend Article 50 and use the time to find a solution that would provide for an orderly Brexit.

“In between these Brexit points, the Spring Statement was largely an exercise in treading water. The good news was that economic forecasts are holding up (with a slight improvement on last year’s forecast) and public finances are looking strong enough to possibly allow for some significant increases in public spending (specifically referencing local government) in the multi-year Spending Review that will be launched in the summer. These measures are all subject to an orderly Brexit and avoiding no deal.

Making Tax Digital updates

Perhaps one of the most significant announcements in today’s statement was the reference that the government will not mandate MTD for any new taxes in 2020.

George Bull, senior tax partner at RSM, said: “Previously, we were expecting MTD to be extended to income taxes and corporation taxes from 2020, but this now appears to have been deferred to an as yet unknown later date. It’s likely that HMRC will want to fully assess how MTD for VAT, which comes into force in 2019-20, is working in practice before committing to an extension.

“This is a far cry from the ‘end of the tax return’ we were promised back in Budget 2015.”

As for MTD for VAT, of which the deadline is less than a month away, Adrian Rudd, Chair of CIOT/ATT, said: “While some of the requirements of MTD apply from 1 April 2019, this is not the deadline for enrolling into MTD. For many businesses the deadline for signing up may be nearer the beginning of August 2019.

“Businesses need to enrol into MTD for VAT at the right time, and only when they are confident that they can submit their next VAT return using MTD-compatible software, otherwise significant problems can arise. We have produced a guide to the sign up ‘windows’, to help businesses transition into MTD as smoothly as possible.”

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