AS BRITAIN EDGES ever closer to an answer over its European identity, practitioners and tax advisers believe George Osborne will use this week’s Budget to declare that Britain remains “open for business” in this uncertain time.
The tax community estimates that this will be a revenue-raising budget as the chancellor continues to eliminate the deficit before the end of the decade, but many feel he’ll try and avoid an “omnishambles” Budget as we head into the referendum.
Now that radical reform of pensions tax relief has been put on the backburner, Osborne will be looking for other ways to fill the government’s coffers, but will find difficulty in raising some of the higher-profile taxes.
With insight analysis from some of the UK’s top tax advisers, here are seven items could be on Osborne’s agenda on 16 March:
With Britain’s tentative position in Europe constantly hitting the headlines, and Goldman Sachs predicting that the value of Sterling will fall 20% if we leave the EU, it would be seem implausible for the chancellor not to mention how British taxes could be affected by the referendum.
Stephen Herring, head of taxation at the Institute of Directors believes that it’s “not impossible” that this will be the last budget before we see a new leadership contest, but that all depends on how the public vote on 23 June.
If Britain does leave the European Union, any red tape from Brussels over UK tax rulings would be removed, a factor which Laurence Field, head of corporate business at Crowe Clark Whitehill believes could tempt Osborne to implement “company-friendly” tax measures to attract more business.
Some practitioners are guessing that Osborne will begin to create a legacy for himself as a tax reforming chancellor in this difficult period, but many believe he will be unable to make any bold moves when it comes to VAT, income tax or NICs.
However there could be some announcement over other taxes pre-referendum, such as the merging of inheritance tax and capital gains tax.
Both RSM senior tax partner George Bull and BDO tax partner David Brookes believe that Osborne will increase fuel duty while prices at the pump are still fairly low in order to raise vital funds.
The accountancy world is expecting an announcement on the long-awaited business tax roadmap, something which will give businesses greater clarity over the amount of tax they have to pay.
Despite that, PwC international tax partner Stella Amiss fears that Osborne risks “trading confidence for yet more uncertainty” if he fails to go into detail around corporate taxes.
Osborne is also expected to announce the results of the review of the long-overdue business rates system. With the 2017 business rates revaluation fast approaching, Osborne will be keen to maintain the £23bn-a-year income stream from the rates, while at the same time reducing the burden on business owners.
Despite the Treasury making it clear that there will be no sweeping changes to pension tax relief in the upcoming budget, there have been calls to simplify elements of the pension tax regime, including areas such as the Lifetime Allowance and lowering the Annual Allowance to £25,000.
EY private client services partner David Kilshaw believes that if the chancellor is feeling radical, he’ll still announce a move to the ISA pension model, meaning that people will receive tax relief once they retire instead of when they start saving, which Kilshaw reckons will provide “a huge cash flow advantage to the Exchequer”.
The public is keen to see the government proactively combat the threat of multinational tax avoidance, as the dust continues to settle over HMRC’s controversial £130m tax settlement with Google, as well as the announcement that Facebook is going to start to pay more corporation tax in the UK.
Even if the UK leaves the European Union, it’s very unlikely that Britain’s ties with the G20, the OECD and its BEPS initiative will be broken. Field predicts that Osborne could introduce some initial measures from BEPS in the budget, such as county-by-country reporting.
There is less than a month to go until every individual and small business will have access to a digital tax account.
HMRC is making efforts to publicise the digital transformation to taxpayers, but many tax advisers and accountants feel that greater clarity on the initiative is needed.
PwC tax partner Alex Henderson believes Osborne and HMRC need to instil a “change of culture” and not just a change in platform to make the project a success.
“Without a rigid support framework to enable HMRC to deliver the promises of a new digital platform, the digitisation project would risk becoming implausible,” said Henderson.
Bull suggests Osborne could use the digital tax accounts to accelerate tax collection from the self-employed, producing a one-off tax windfall of £6bn, another way in which the chancellor can increase strengthen the purse strings without raising the ‘holy trinity’ of taxes.
The UK tax code is complicated, that’s something nearly every accountant will agree with.
With a study showing that the length of the UK tax code has grown to 12 times greater than the King James Bible, practitioners are predicting the Osborne will exercise reform.
Tina Riches, national tax partner at Smith & Williamson hopes that Osborne will begin to cut down tax legislation from approximately 23,000 pages to a target of just 1,000, while David Brookes hopes that the chancellor announces plans to fast track the plans of the Office of Tax Simplification, a notion that has recently been recommended by the House of Lords Economic Affairs committee.
And while we’re at it…
Apprenticeship levy: The payroll tax is set to hit businesses with payroll costs of over £3m per year in 2017, so it’s likely that Osborne will mention the levy like he did in the Autumn Statement. The CIoT has called for the government to clarify how the levy will fit in with plans to align income tax and NI, so we may be hearing more on that on the 26th.
Sugar tax: After David Cameron hinted earlier in the year that his stance on a 20% tax on sugary drinks could change, it might be a possibility that Osborne mentions something about introducing a tax to combat Britain’s diabetes crisis.
Companies must report on their complex financial structures including offshore accounts and notify HMRC
An examination by the Public Accounts Committee (PAC) has revealed serious concerns relating to HMRC’s plans
Andrew Tyrie suggests there will not be enough time to implement Making Tax Digital (MTD) by April 2018
The ACCA has announced a partnership with UK research and development tax reclaim specialist RD Tax Solutions