So after impressive economic and market performance following the Brexit vote in June, we now face almost uniformly pessimistic predictions for growth, a plummeting pound and continued low interest rates and quantitative easing.
What can we expect in this month’s Autumn Statement from our new Chancellor, who stated early in his tenure he would be looking to reset fiscal policy?
The Government has already very publicly ditched former chancellor George Osborne’s 2020 zero deficit goal as a clear indication of its current thinking on this important matter.
The recent Conservative party conference offered a potential opportunity for us to learn a little more about what fiscal policy might look like. However, this was not the place for detail; more a place for headlines.
Taking taxation to task
We knew the Government would continue to be hard on tax avoiders and the Prime Minister reaffirmed this – forcefully. “We’re coming to get you,” was the message to those who avoided tax and facilitated it. But that message had already been given in the earlier launch of the consultation on such facilitators.
As I have made clear in the past, it is only arrangements where the desired tax advantage has not been secured due to “defeat” by HM Revenue & Customs that are being targeted. So the arrangement would first need to be challenged by HMRC through the tribunals/courts.
This means most ordinary financial planning strategies (for example, those involving pensions, Isas, VCTs, EISs, BPR schemes, collectives and bonds) will not be in scope. They are contemplated (encouraged, even) by legislation and, in ordinary use, do not defeat the intention of Parliament. So that is alright, then.
What else could be addressed? Well, at the conference, the Chancellor referred clearly to the UK’s already low rate of corporation tax and the fact it will fall again to 19 per cent next year and to 17 per cent from 1 April 2020.
Given all the continuing uncertainty over “what kind of Brexit” we will be getting – and, as a result, what kind of passporting/trade deals we will secure – a low corporation tax rate does not do any harm.
On income tax, most would agree there is unlikely to be any substantial change proposed. A “redistributive” set of measures could not be ruled out over the course of Parliament but most would be surprised to see any return to a 50 per cent top rate in 2017/18. Then there is the statutory “lock” on personal tax and National Insurance. A lock that could always be undone by fresh legislation, of course.
On investment taxation, we have already seen fundamental change all around – notably to the taxation of capital gains, savings income and dividends. There could have been some risk to amendments being made while these changes were resting in the Finance Bill but we can assume they are relatively safe now that is an Act.
“Given all the continuing uncertainty over “what kind of Brexit” we will be getting – and, as a result, what kind of passporting/trade deals we will secure – a low corporation tax rate does not do any harm.”
That said, we have the consultation on investment bond taxation and we may see some resolution setting out the new rules for taxing part surrenders. There is little doubt the sector’s favourite option is the simple immediate 100 per cent allowance, instead of 5 per cent per annum cumulative for 20 years. As HMRC has put this forward as an option, we can be hopeful it may be the one implemented.
On inheritance tax, there is a well-accepted need for simplification, especially in relation to the new residence nil-rate band. The Autumn Statement may be a little too early for that.
Not so, though, for the revised extended Disclosure of Tax Avoidance Schemes provisions for IHT. Extending the reach of Dotas is an important part of HMRC cashflow strategy. The good news is that it seems as though most of the plans the sector deploys in IHT planning around retail investments (especially insurance products) look set to escape the reach of any extended provisions.
Meanwhile, pensions continue to attract significant attention. The tax cost under the current regime is a big number so it is not surprising. The Office for Budget Responsibility has recently reported on the overall current and potential future cost of tax reliefs and some interest is apparently being shown in the suggestion of age-related option skewed towards younger investors.
All in all, anything is possible. And while most think the Autumn Statement might be a little early for any radical change, you just cannot rule it out.
Tony Wickenden is joint managing director of Technical Connection. You can find him Tweeting @tecconn