The Spring Statement – The Sideshow to a Circus of Horrors!
The Chancellor’s Spring Statement was always going to be a sideshow to the main attraction of Brexit, writes Robert Leggett – Corporate Tax partner, Ensors Chartered Accountants.
However, coming less than 24 hours after the Government’s latest defeat on the withdrawal agreement, it seemed almost bizarre how secondary an important financial statement could actually feel.
Hammond recognised this, shortening his speech and publishing much of the detail in a written ministerial statement. Although we saw a few of his now characteristic quips (largely at the expense of the Shadow Chancellor), it was clear that he was actually in rather a serious mood.
His view was that the vote gave rise to significant uncertainty in respect of the economy. No great surprise; my clients are desperate to have certainty of what is happening so that they can act accordingly.
That said, the Chancellor’s figures continue to point to a fundamentally strong economy, which isn’t unimpressive in the context of a European and global slowdown. Borrowing for 2019 is now expected to fall to 1.1 per cent of GDP; apparently £3 billion lower than forecast at the Autumn Budget, with record employment.
As a result, Hammond promised us a full spending review before the summer, which is expected to deliver 1.2% per cent real term increases in departmental spending … as long as we avoid a ‘no-deal’ Brexit.
There were precious few tax points of any substance; again, no surprise. Why, you might ask? Well, it could just be that all the people who draft tax legislation are currently employed on dealing with Brexit legislation.
Indeed, most of the tax announcements at the Autumn Budget were deferred until 2020. A series of consultations on these upcoming measures will be published.
There were important points on Making Tax Digital. Of course, most VAT registered businesses above the VAT threshold will need to keep their accounting records digitally from April this year, and file their VAT returns via digital software.
It has now been confirmed that there will be a ‘light touch’ to penalties in year one; where businesses are doing their best to comply, there will be no filing or record keeping penalties.
Furthermore, there will be no expansion of MTD to income tax or corporation tax during 2020.
Other key points were:-
• Further infrastructure spending, with nine new areas getting funding for full fibre broadband (including Norfolk and Colchester), and 10 new cities benefiting from the Transforming Cities fund (including Norwich)
• Accelerating improvements to the Apprenticeship Levy to April 2019
• A commitment for additional funding for the British Business Bank for venture and growth capital, and a new UK Export Finance General Export Facility to provide more flexible short-term support to UK exporters
• PhD-level occupations to be exempt from the general cap in Tier 2 visas
• Various low carbon initiatives, including A Future Homes strategy, to ensure no new homes rely on fossil fuels by 2025, and a small business energy efficiency scheme
• A new strategy for offshore tax compliance – the “No Safe Havens 2019” programme;
• Free sanitary products in secondary schools
• More detail on tackling the effect of late payment on small businesses, including requiring large company audit committees to review payment policies
• Draft legislation on the new “Structures and Buildings Allowance” – a tax relief for capital expenditure on commercial buildings introduced from the autumn budget
• £100m for police overtime etc to tackle the other issue of the day – knife crime.
So, if that was the sideshow, we return to the “main attraction”, which is looking more like a circus of horrors every day.
It is clear that those businesses that have not already done so need to take steps to cover every Brexit eventuality, including no deal.
Most affected are business who are trading between the UK and EU, and they should refer to the Government guidance. However, even domestic businesses need to take stock of matters, thinking about things such as continuity of supply of materials and labour, to give maximum flexibility. Roll up, roll up – the circus is coming to town!