Looking back over the form of the chancellor’s Budget presentation, and the substance of the documents published by the Treasury and HMRC since then, Philip Hammond has emerged with his credibility enhanced and his position in government more certain. At least for the time being.
As Mr Hammond unveiled details of what has proved to be a massive give-away Budget, concerns grew that stealth taxes would be buried somewhere in the detail. But no. Major tax increases were clearly signposted.
For example, £1.77bn over five years from freezing the capital gains indexation for corporation tax. A projected £800m by 2022-23 from a new tax on royalty payments made to low-tax jurisdictions. And £2.38bn over the five-year period from HMRC using additional funding of £300m to continue its work in tackling tax avoidance, the hidden economy and tax evasion.
Interestingly, while tax avoidance is often thought to be a scourge of the UK tax system, after many years of hard work HMRC has reduced this to £1.7bn a year. By contrast, tax evasion and the hidden economy cost the UK £8.7bn a year. HMRC does not need a new law to tackle this: the extra funding will help the taxman make existing measures stick.
- For private clients, the focus is on tax rates for investment and tightening anti-avoidance rules.
- Offshore trusts remain in the spotlight.
- There will be no benefit-in-kind for employees charging their electric cars at work, and the diesel supplement will increase on certain cars.
For private clients, the focus is on tax rates for investment and tightening anti-avoidance rules.
The chancellor continues to aim for the 2020 manifesto commitment of a £12,500 personal allowance and £50,000 starting point for higher-rate taxpayers, with increases towards this from April 2018.
He also introduced a valuable first-time buyer stamp duty land tax (SDLT) exemption. Worth £3.19bn for the period to 2022-23, it offers a £300,000 threshold to first-time buyers. Those claiming the relief will pay no SDLT on the first £300,000 of the consideration and 5 per cent on any remainder.
No relief will be available where the total purchase price exceeds £500,000. Unless those buyers are acquiring new-build property, uptake could be limited as there is no incentive for existing owners to upsize their properties.
Before Budget day there were concerns that the level of reliefs for tax-efficient investments via the enterprise investment scheme and venture capital trusts might be reduced, as they could be seen as being excessively generous. In the event, the chancellor viewed these as a good source of funding for knowledge-intensive companies. For these companies, individuals will be able to claim relief on qualifying investments up to £2m.
Offshore trusts remain in the spotlight. New anti-avoidance rules were already set to take effect from April 2018. A consultation will be published on 1 December, covering the scope of offshore arrangements on which information must be notified to HMRC in advance.
HMRC will also be extending the minimum time limit for enquiries into offshore matters, to a minimum of 12 years where there has been non-compliant behaviour.
Trusts generally will be under scrutiny again, both UK and offshore trusts, with a consultation next year on making their taxation ‘simpler, fairer and more transparent’. It’s unlikely to be good news for taxpayers with trusts.