With the Chancellor’s Autumn Statement announcement on November 25th drawing near, the usual question is ‘what scope do they have for any tax giveaways?’ The reality is, probably very little.
Earlier this year, the ‘Five Year Tax Lock’ was announced, so there is no scope for raising the rates of certain types of tax during the time of the current government.
At the end of October, the government was forced to delay its plan to cut the level of tax credits, so that may leave a shortage of funds, where expected savings are not going to be made.
We are still in the early stages of the new government, so some expect George Osborne to ‘get the bad news out the way now’ and make tax increases, in the hope it is somewhat forgotten when the next election comes around.
The focus could, therefore, be on increasing the tax take, particularly through HMRC’s compliance and investigation activity as well as the HMRC’s many voluntary disclosure campaigns, which have been seen as successful.
In the last couple of weeks, we have seen a number of activities from HMRC, including:
- Announcing that 27 new taskforces were launched; in the North East they include targeting the hair and beauty industry and motor traders.
- Reminding people with undeclared rental income to make a voluntary disclosure under the Let Property campaign, to help reduce potential penalties.
- Reminding people with additional income that has not been taxed (eg consultancy, part-time work, buying and selling goods) to make a voluntary disclosure under the Second Income campaign to help reduce potential penalties.
Additionally, HMRC reminded us all that the Voluntary Disclosure Helpline can always be used for any matters not covered by the above.
The Autumn Statement should also include more detail on some of the announcements at the Summer Budget.
The two most far-reaching changes are likely to be:
- The introduction of a new 7.5 per cent rate of income tax on dividends, which is in addition to the existing higher and additional rates already in force.
- Changes to the rules of non-taxable travelling expenses for certain workers who provide their services through a personal service company or an umbrella company.
- The removal of higher rate tax relief on mortgage interest paid by residential landlords.
There will no doubt be continued focus on HMRC’s new digital platform, which needs considerable development before it will be able to handle the level of usage and interaction that will be demanded by the online tax accounts, which are set to replace the current system of self-assessment tax returns.
What about any surprises; could there be any more bombshells such as the significant and unexpected change that was previously announced in connection with dividends?
Well, over the last year or so we have seen the government withdraw some of the incentives that led many small businesses to operate through a limited company structure.
Entrepreneurs’ Relief often gave just a 10 per cent rate of Capital Gains Tax on the eventual sale, winding up etc, of such businesses and is, therefore, a very valuable relief.
There have been rumours in the past that it may be cut in some way, so maybe we will see an announcement connected with that.
Further reading on tax
