AUTUMN STATEMENT 2016: REACTION FROM UNW
The Autumn Statement was the new Chancellor’s first real chance to set out the government’s financial strategy post Brexit. David Ward, a partner in UNW’s tax practice, says that Philip Hammond has mixed continuity with the course charted by his predecessor, with some changes reflecting the new circumstances confronting Theresa May’s government.
The Chancellor confirmed that he would adhere to the previously announced staged reductions in the rate of Corporation Tax from the current 20 per cent to 17 per cent by 2020 but was clearly not prepared to go further than that as some commentators had urged in the wake of Brexit. Indeed he announced a consultation exercise which would review current disparities between the tax treatment of the self-employed and incorporated businesses suggesting perhaps that in due course there may be a change to the taxation of the latter.
On the employment side, the Chancellor announced an alignment between employer and employee NIC thresholds and an increase in the National Living Wage. Both of these measures are to take effect from April 2017 and will result in increased costs to employers.
A further change which will impact those employers operating salary sacrifice schemes was to equalise the tax on benefits with that on cash salary, with some limited specific exemptions, such as pension contributions and childcare, from April 2017.
The Chancellor announced further steps to counter various aspects of tax avoidance including: disguised remuneration, inappropriate use of the VAT flat rate scheme, employee shareholder status and new penalties where tax avoidance schemes were challenged successfully by HMRC.
The Chancellor affirmed that the tax free personal allowance would be raised to £11,500 for tax year 2017/18 and that this would continue to rise to a target figure of £12,500 by the end of this Parliament. Similarly he would maintain the objective of raising the threshold for the higher rate of 40 per cent income tax to £50,000 on the same timescale.
Having drawn attention to the scale of the productivity gap between London and the regions, the Chancellor announced further local growth funding of £1.8bn, of which more than £550m would be going to LEPs based in the North of England, with further details to follow.
No more Autumn Statements
In conclusion Philip Hammond announced that this would be his first and last Autumn Statement. Next year there would be a Budget in the spring but after this the Budget would be delivered each Autumn with a statement the following spring confined to the government’s response to the latest report from the Office of Budget Responsibility and which would not constitute “a major fiscal event”. This would enable greater Parliamentary scrutiny of the Budget and marks a change in the approach of his recent predecessors who have been unable to resist the temptation to effectively deliver two Budgets each year.
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