The Autumn Budget is being delivered by the Chancellor of the Exchequer, Phillip Hammond, on Wednesday 22 November 2017. We have a range of predictions about what he might include in this Budget, from our panel of experts.
- Adam Blakemore, partner, and Catherine Richardson (AB & CR), associate, at Cadwalader Wickersham & Taft
- Hatice Ismail (HI), partner, at Simmons & Simmons
- Stephen Pevsner (SP), partner, at Proskauer
- Prabhu Narasimhan, partner, and Harry Smith (PN & HS), associate, at White & Case
What tax measures will be announced at the Autumn Budget 2017?
AB & CR: With uncertainty as to what the economic and political landscape will look like in the aftermath of any Brexit settlement, the Autumn Budget 2017 is an opportunity for the government to provide a renewed commitment to measures that will ensure economic growth for individuals and support, and encourage businesses in the UK. In most years, this would ordinarily be enough of a challenge, but in the current environment, the Chancellor will perhaps feel the pressure of balancing various fiscal measures more acutely.
An obvious candidate for the Chancellor’s announcements would be the abandonment of the previously announced further reduction in the corporation tax rate to 17% in 2020. Such a reversal of a high-visibility commitment to lower headline corporation tax rates would be difficult for the Chancellor to make from a political context. Any additional revenue generated from such a reversal is unlikely to justify the negative political consequences.
It is possible that additional or increased investment incentives may be announced, particularly in sectors where the government anticipates the adverse consequences of Brexit may be felt most keenly and to add further length to what is already the world’s longest tax code, a new Brexit investment allowance would not be a complete surprise. However, we anticipate the government will be cautious in providing any such ‘giveaways’, particularly at a time when Brexit negotiations are so finely balanced. Bringing forward previously announced changes to the basis for increases in business rates also seem likely.
Concessions or exemptions for first-home buyers or those ‘downsizing’ under the stamp duty land tax (SDLT) regime might be funded by deferring previously announced changes to income tax thresholds and further restrictions on tax relief on pensions contributions.
It is likely that the Autumn Budget 2017 will be more forward-looking than just up to the point at which Britain leaves the EU in March 2019. Revenue neutral measures aimed at simplifying the UK tax system and which give effect to the work of the Office of Tax Simplification would be welcome. Given the UK’s lead in enacting legislation denying certain benefits from hybrid instruments, the UK might also undertake a similar exercise which focuses on the taxation of the digital economy.
Finally, given the recent media attention to perceived ‘offshore’ tax avoidance in the so-called ‘Paradise Papers’, some headline grabbing measures targeting some of the more visible forms of assertive tax mitigation and any remaining tax avoidance are likely. It may, in this context, be an uncomfortable Autumn Budget for owners of luxury jets.
HI: In many ways, the Autumn Budget 2017 may be one of the more difficult to predict in recent years. On the one hand, following a March Budget and two Finance Bills in 2017, one might expect a relatively low-key Autumn Budget, particularly with Brexit to occupy the policy makers at the Treasury. However, on the other hand, the political fallout from the summer election seems certain to require some reaction from a beleaguered government and tax may well be one of the political tools used in an attempt to wrest back some initiative.
One area in relation to which all eyes will be on the Chancellor will be the tricky issue of employment versus self-employment. The Chancellor’s, frankly minimal, pre-election attempt to bring some balance to the National Insurance position was met with such vehement opposition that it was hastily abandoned. However, the 2017 Manifesto did not repeat the Conservative promises not to increase income tax and National Insurance contributions, so it will be interesting to see if the Chancellor has the necessary strength to return to this topic, which has been further in the news in the wake of the ‘Taylor review of modern working practices’. It is unlikely in the extreme that we will see any fundamental changes announced of the sort contemplated by the Taylor Review, but this is not a topic that is going to go away and I would not be surprised if the Chancellor introduces some further measures to more closely align the taxation of the employed and self-employed, notwithstanding the differences in the rights they enjoy.
SP: Given the government’s current struggles, there are not expected to be many surprising or exciting announcements in the Autumn Budget 2017. The focus on the youth vote and housing might mean abolition of stamp duty for first-time buyers and a stay on the proposed business rate increases. The focus on raising revenue and the topicality of the gig economy might mean that the personal company rules now applicable to public sector workers under which it is the public sector body and not the personal company that is responsible for applying the employment or self-employment test might be extended into the private sector. Other possibilities are that the entrepreneurs’ relief conditions might be extended to require a closer alignment between shareholding and economic rights and that something might be done to try to clarify the UK tax status of certain types of non-UK entities. Finally, there will no doubt be some unexpected extension to the UK’s raft of anti-avoidance provisions.
PN & HS: After the far-reaching changes to the corporate and partnership tax landscape enacted (or to be enacted) by the last couple of Finance Bills, we do not predict fiscal fireworks from the Chancellor in November 2017.
It may be over-optimistic to hope for more clarity on proposed post-Brexit customs arrangements, though this would certainly be welcomed by the broad swathe of businesses that any necessary changes would impact. We would not be surprised to see some changes to the SDLT regime—though whether these will be incremental (perhaps including some relief for first-time buyers of residential property, especially in light of the recent base rate increase) or more radical (such as the long-awaited abolition of paper stamp duty) is another question.
Of course, no modern budget would be complete without continuing the relentless drive against avoidance and evasion, so we expect to see plenty of measures aimed at plugging the tax gap.
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Interviewed by Alex Heshmaty. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.