28th November 2016

Following the announcement that after 2017 there will be just one annual fiscal event, Charles Linaker, partner in UNW’s tax practice, discusses whether this development could herald more fundamental reform of the UK’s tax system?

On Wednesday 23 November, Philip Hammond announced to the House of Commons that his first Autumn Statement would also be his last. There will be just the one annual fiscal event, an Autumn Budget, followed by a Spring Statement, confined to responding to the latest report of the Office for Budget Responsibility.

For the last 20 years one of the frustrations for tax practitioners has been having to wrestle with the complexities of, in effect, not one but two Budgets each year. Starting with the reign of Gordon Brown and then, after the interregnum of Alastair Darling, perhaps even more so with that of George Osborne (in many ways as much Brown’s successor as Cameron was heir to Blair) it has been a case of one damned policy announcement after another, followed frequently by embarrassing reversals. Remember Brown’s ill-fated 10p tax rate and Osborne’s “omnishambles”?

Part of the problem was no doubt the fact that both Brown and Osborne had their eyes on the keys to No.10 and were using their position as Chancellor to emphasise their power across the whole of government, thus demonstrating their credentials to become Prime Minister.

charles-linaker
Charles Linaker, Tax partner at UNW LLP

But I believe that another part of the problem was that neither Brown nor Osborne had any meaningful personal experience of business before he entered Parliament, at the early ages of 32 and 30 respectively, and so had no conception of what it was like to be on the receiving end of all the changes which they introduced when in office.

The contrast with Philip Hammond could not be more stark. Here is a man who apparently exhibited early entrepreneurial promise when still a teenager and who then, despite having acquired an Oxford degree in PPE, spent several years pursuing a variety of business interests, not entering the Commons until the age of 41.

The return to having just the one Budget proper each year and in the Autumn, rather than the Spring, so that it is well in advance of the new financial year, should result in improved consultation, keener scrutiny in Parliament and ultimately, it is to be hoped, better and simpler tax legislation.

Dare one hope too that Hammond might don the mantle, last worn by Nigel Lawson in the 1980s, of a great tax reforming Chancellor?

Speaking as someone who served as one of Her Majesty’s Inspectors of Taxes for most of Lawson’s time as Chancellor and who since, as a tax practitioner, has had to grapple with the consequences of the many ill-conceived and often contradictory changes introduced by his successors, it is beyond argument that a major overhaul of the UK tax system is long overdue.

And it could be that one of the unforeseen consequences of Brexit is that it provides the impetus to make this happen and makes it easier to happen.

At present, HMRC is seeking to embark on a new “Making Tax Digital” (MTD) Strategy, a legacy inherited by Hammond from Osborne and which has already been christened by many who have considered its proposals as “making tax difficult”.

Interestingly Hammond made no comment on MTD in his Autumn Statement. Perhaps he has already realised that, under the current proposals, HMRC is trying to change too much, too soon for too many and that it would make more sense for him to concentrate first on reforming the tax regime itself.

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