Election 2017  

What the election result means for business taxation

What the election result means for business taxation

On the morning following a remarkable night the most likely political outcome is that the Conservative Party will be back in government, albeit without an overall majority and reliant on the votes of Northern Irish MPs to survive.

This means that business can, at least for now, put the other parties’ manifestos out of mind, and tentatively start to make plans on the basis of the pledges made by the Conservative Party.

In many respects, the new government can be expected to pursue the line that was being taken before the election.

Corporation tax is already due to fall to 17 per cent by 2020, and the Conservatives pledged to stick to this plan - although US President Donald Trump reducing the US rate of tax to 15 per cent could cause the government to go further to remain competitive.

The Tories also said they would not increase VAT, and continue the march towards a personal allowance of £12,500 - and a higher rate income tax threshold of £50,000 by 2020.

The attack on tax avoidance and the intention to simplifying the tax system can be expected to continue.

The Finance Bill published in March of this year had to be cut drastically before it passed into law in advance of the election.

The legislation removed included:

* Changes to the corporate loss relief rules;

* Simplification of the Substantial Shareholdings Exemption;

* Restrictions on interest deductions for larger companies; 

* The introduction of Making Tax Digital.

Most commentators are expecting a new Finance Bill that picks up the dropped legislation.

It is possible that the Making Tax Digital proposals will be delayed a year – as many have recommended – but the unincorporated businesses that were previously due to come into the regime from April 2018 should certainly not count on this.

The Conservatives conspicuously did not pledge to maintain (or reduce) current rates of income tax and National Insurance Contributions.

While it is unlikely that rates of income tax will increase it is entirely possible that NICs will rise for the self-employed, and if Philip Hammond remains chancellor he will be free to increase NICs.

There is expected to be a full review of the business rates system, and there have been hints of more support through the tax system for research and development and for online media businesses.

The Conservative Manifesto also promised a one-year holiday on employers’ NICs where businesses take on armed forces veterans, people with chronic mental health problems, and those who have been unemployed for over a year.

The new Parliament will of course be dominated by Brexit, and this is bound to have some impact on the tax system.

European Union-derived restrictions on tax reliefs such as the enterprise investment scheme or research and development could be repealed - although this will depend on the deal agreed with the EU and the impact on the Exchequer.

Companies relying on these schemes should not delay.

Subject of course to how the political situation settles over the next few days, we do not expect a significant change in the speed or direction of tax policy in the short term.