Weariness prevails as UK’s autumn statement looms
With the autumn statement looming large, industry leaders are speculating, with more than a small hint of weariness, about what the chancellor could announce this time.
“Autumn statements have an existence of their own, independent and distinct from budgets,” said George Bull, senior tax partner at RSM. “But to be honest, the picture begins to blur so that many will feel that the 25th November autumn statement is all too much like another budget, the third in a little over eight months.”
Tax Triple Lock
“Cuts in reliefs in respect of inheritance tax (IHT), pension contributions, and interest on business borrowings could feature high on the chancellor’s shortlist,” predicts Tina Riches, national tax partner at Smith & Williamson.
Under pressure to increase tax revenues, chancellor George Osborne’s hands are tied as a result of the “triple lock” on the headline income tax, National Insurance, and VAT rates – which combined account for nearly £385bn (€549bn, $584.6bn), almost three quarters of the £515bn tax receipts for 2014/15.
“So now that a straightforward percentage increase to any of the three main taxes is off-limits, Mr Osborne’s mind needs to focus on enlarging the tax base and other tweaks that will raise revenue. However, continual change causes complexity on top of what is already an opaque and very lengthy tax code,” Riches added.
“To be honest, most people would like a break from the ceaseless flood of tax changes we have seen over recent years.”
Changes for non-doms
Mark Davies, managing director of Mark Davies & Associates, expects an update to the reform on the taxation of non-doms, which would mean that those who have resided in the UK for more than 15 of the past 20 tax years would be deemed UK-domiciled.
“The government has recognised that non-doms claiming the remittance basis make a considerable contribution to the UK Exchequer (paying £4.91bn of income tax in 2013-14) and the chancellor is trying to balance the inability for long-term residents to claim the remittance basis with beneficial changes to the taxation of trusts,” Davies explained.
“The government is proposing to change how the income and gains within trusts are taxed now to the point when a beneficiary takes a benefit. We expect to see how that benefit might be calculated and what rate of tax might be charged. We expect that the legislation due to be enacted in Finance Act 2016 will be pushed back to Finance Act 2017 due to the complexity of the changes.”
A recent discussion paper from the Institute of Chartered Accountants in England & Wales (ICAEW) has already warned that “the potential damage to the UK economy [from the crackdown on non-doms] could outweigh any anticipated exchequer gains” by making the UK less attractive for wealthy foreigners and investors. “What upsets wealthy investors most is the uncertainty about what the rules will be and whether they are likely to change while they are here,” Davies added.
Expect the unexpected
Old Mutual Wealth pensions technical expert, Jon Greer, commented: “The way I see it, the spending review and autumn statement is an opportunity for the chancellor to set the scene on a few rolling items ahead of the budget in March 2016.
“Consumers should also see it as a signal to undertake a review of their finances, both ahead of the statement itself and ahead of the budget and tax year end in April 2016. We do not expect to see any significant announcements this time but then nobody was expecting that in March 2014 either.”
Greer continued: “In the first instance, if you are a higher rate taxpayer and have the ability to, and are thinking of, funding extra amounts into your pension, I would do so as soon as possible. This is because even though the chancellor has indicated that the government’s future plans on Pension Tax Relief will not be detailed until budget 2016 – with the likelihood that higher rate taxpayers will see a reduction in the relief available on their pension contributions – recent experience suggests we should expect the unexpected.”
Too much change
“To be honest, most people would like a break from the ceaseless flood of tax changes we have seen over recent years. But with so many consultations yet to produce specific HMRC proposals, with a promise of more anti-avoidance and anti-evasion legislation and with both Europe and the OECD prompting changes to the UK tax regime, that’s a vain hope,” added RSM’s Bull. –
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