Traditionally the first Budget of a new Parliament might be expected to lay the foundation for the remainder of the parliamentary term, and set out the broad framework of policy that the Government expect to implement.
Immediately following a general election the Chancellor would usually be less susceptible to populist pressures, and demands from back-benchers. That is certainly not the position that the current Chancellor finds himself in as he prepares for the first Autumn Budget in two decades. Indeed he may already be regretting the move to a single fiscal event, departing from the recent pattern of important fiscal changes being announced at both the Autumn Statement and the Spring Budget, which may force him to show his hand on matters he’d rather have delayed for another six months.
Against the backdrop of political and economic uncertainty caused by Brexit what may we expect on Wednesday?
With an increasing public focus on the taxation of multinational companies, and the complexity of many of the measures being introduced as a result of the work by the G20/OECD on Base Erosion and Profit Shifting, businesses will be hoping for some stability and the opportunity to digest many of the recent changes. Perhaps the Chancellor will update on the Business Tax Road Map, reaffirming the medium term goals for the taxation of companies, but we can also expect promises of more curbs on tax avoidance. He may also be tempted to emulate some of the proposed tax reforms in the USA and increase incentives for capital investment, particularly in preparation for any adverse economic impacts of Brexit. More radically might there be a re-think on tax relief for industrial buildings in order to attract more foreign direct investment?
In relation to employment taxes the Chancellor demonstrated in his last Budget that he is very much aware of the shifting of the UK tax base and the implications for the Treasury coffers as the UK transitions to the “gig” economy. He will doubtless remain bruised from having to reverse his proposals with regard to increasing National Insurance contribution levels for the self-employed, which was a only a small first step in trying to adjust the tax base to deal with the consequences of the general trend from employment to self-employment, and may be unwilling to risk a repeat performance. Probably the substantive tax policy changes required will be left on the “to do” list on Wednesday, but it is possible that the off-payroll workers rules introduced for public sector employers with effect from April will be extended to the private sector. That may be coupled with an increase in the dividend tax rate to try and reduce the benefit of working through a company.
Other changes could be:
– in the rates or bandings for stamp duty land tax (not applicable in Scotland but could cause the Scottish government to rethink rates and bands in Land and Buildings Transaction Tax) as the increased yield from the tax is attributable to the additional charge for second homes and masks the underlying downturn in property transactions;
– to personal taxation if the Chancellor pursues a theme of creating “intergenerational fairness” and shifts the burden more towards the elderly; and
– to pensions, which has become a favourite of many chancellors in recent years.
All will be revealed on Wednesday, in the meantime look out for my oil and gas tax predictions on Tuesday, Budget commentary on Wednesday and analysis of the Budget on Thursday.
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