The Chancellor, Philip Hammond, will present his first Autumn Statement on 23 November. As always, mca will be following the Statement closely and issuing Tweets and a post-Statement summary with our views. What do we expect to see?
It has been widely leaked that the Chancellor is unlikely to adopt George Osborne’s promise of cutting the main rate of corporation tax to 15%. Mr Hammond recently told a meeting of Finance Ministers in Bratislava that he intended to stick to a plan to cut the rate from 20% to 17% by April 2020.
The wider picture is more uncertain, though. The financial markets did not react as many had predicted following the EU Referendum. The UK stock markets have been performing strongly, and Sterling has recovered much of the lost ground. Despite this, trade talks have yet to start and the longer run implications for the macro-economy remain uncertain. Probably, due to this, the Prime Minister has confirmed that the Government will not attempt to balance the books by the end of the decade, although a budget surplus remains the long-term ambition. There have also been strong hints that any fiscal stimulus in the Autumn Statement will be aimed at boosting Britain’s roads and rail infrastructure.
In terms of the SMEs for which we predominantly work with, what would we like to see?
Lower tax on profits is fine, but you need to first earn those profits. We’d like to see more immediate help such as cutting business rates and increasing incentives for investing in plant and machinery, both strong spurs for investment. We hope very much that there won’t be any changes to incentives such as R&D tax credits, and we would welcome some simplification to the unduly complex rules for raising finance under the Enterprise Investment Scheme.
In relation to personal taxes, there’s probably little more to be done with capital gains tax, and inheritance tax doesn’t raise sufficient revenue to make tinkering worthwhile. We strongly oppose an increase in the rates of income tax, and hope that the continued increase to the personal allowance will be accelerated to take more lower paid earners out of the tax net completely.
And assuming that Brexit does eventually happen, we will have more freedom with VAT. A bold Chancellor might increase the rate of VAT on non-essential goods and services, whilst introducing a zero rate on many more essential items. Currently, under EU law, the lowest rate of VAT that can be levied is 5%. VAT is simple to collect, is transparent, and as far as any tax can be, is a tax of choice. Probably not something for this Government, but it could form the corner-stone of policy for one of the parties at the next General Election.
We will be monitoring the signals in the wider press and from Parliament over the coming weeks leading up to the Autumn Statement and will be posting updates here.