One of the South West’s leading firms of Chartered Accountants Milsted Langdon has been considering implications of likely changes to be announced in the upcoming Autumn Statement.
On 23 November 2016 Philip Hammond will deliver his first financial statement to Parliament as Chancellor of the Exchequer.
The implications of Brexit and the recent results of the US elections will inevitably shape Government policy as reflected in the Statement.
Leon Cane, of Milsted Langdon, believes the Government anticipates a ‘two tier’ European community born of necessity; one of political and monetary union and a second ‘looser’ trading community. Changes in the Autumn Statement will therefore track this outcome.
However, Leon, a tax director, is concerned that the measure which may have the most significant impact on his client base in the South West is the ‘Making Tax Digital’ initiative, which will require businesses to submit digital records to HMRC quarterly.
Leon explained that a deferral of the proposed commencement date (proposed for 2018) and raising relevant thresholds (currently this will apply to all businesses with turnover exceeding £10,000) would be the most welcome (and sensible) announcement on Wednesday.
“The digitalisation of tax is an issue weighing heavily on our profession and the minds of our clients”, added Leon. “Estimates by the Institute of Chartered Accountants in England and Wales predict that this new regime will cost SMEs a minimum £3 billion but up to £7 billion to implement.”
Milsted Langdon has identified three primary sources of possible change in the Autumn Statement. First, the need for re assurance of Government commitment to weather uncertainty caused by political events.
Second is implementation of proposals outlined in numerous HMRC consultations, into which professional firms have invested significant resource in an attempt to produce workable, balanced tax rules.
Finally, representations from Industry Groups which voice specific concerns impacting their sector.
For companies, tax rates could fall in an attempt to balance the impact of Brexit on inbound investment. Free from EU constraints on State Aid, more ambitious extensions to tax assistance around innovation (Research and Development tax credits and Patent Box relief) may be announced.
Changes badged as ‘simplification’ should also be confirmed, which introduce a more flexible use of tax losses, in line with earlier consultations.
A revision of corporation tax payment dates is anticipated (in line with draft regulations already published), which will accelerate tax payment dates for larger companies and a restriction on interest deductibility.
The exemption for disposals by companies of shares in trading subsidiaries is also expected, in line with an earlier consultation.
There has been much recent focus on tax avoidance and evasion, which has featured heavily in previous Statements.
The Chancellor is expected to amend The Disclosure of Tax Avoidance Schemes (DOTAS), in particular bringing VAT disclosure into alignment with the current regime and revising criteria for identification of Inheritance Tax avoidance schemes.
Enablers and users of defeated tax avoidance arrangements may face much harsher penalties, given earlier comments from HMRC that penalties should apply to persons in the “whole supply chain of advice and intermediation” and an earlier consultation.
Speaking ahead of the Statement, Leon said: “Tax avoidance and evasion are a very visible priority and harsher penalties for failure to make appropriate disclosure of offshore assets and UK income will almost certainly feature.
In addition, revision of rules on domicile will make significant changes to disclosure and payment obligations. It is essential that clients are made aware of the implications of these new rules.’’
On the ‘avoidance’ theme, benefits received by employees, reviewed in a recent consultation, will feature with further rules to curtail salary sacrifice schemes, which HM Revenue & Customs have criticised for being a legal loophole for businesses and their employers to reduce their income tax and National Insurance liabilities.
Milsted Langdon says that progress on alignment of income tax and NIC’s into a single ‘employment tax’ may be announced, as creation of a single, simpler tax system is a priority.
Leon concluded: “We have a good idea of what to expect through the numerous consultations which take place, the big question is always the extent to which responses to consultations have influenced the final measure.
However, given the significance of some of the changes to how tax is assessed, collected and penalties imposed it is important to have an understanding of the implications.
To find out more about Milsted Langdon’s wide range of tax services, please visit www.milstedlangdon.co.uk