Autumn Statement has under-delivered for business and JAMS, says tax experts
Chancellor Philip Hammond has delivered an Autumn Statement that provides some relief for low earners, but falls short on indicating an ‘open for business’ Britain, says ACCA (the Association of Chartered Certified Accountants).
According to tax experts from ACCA, changes to the tax-free threshold and Universal Credit taper will bring some—albeit long-term—relief to “just-about-managing” (JAM) households, but the Chancellor missed an important opportunity to cut corporation tax further.
Chas Roy-Chowdhury, head of tax at ACCA, says:
'This Autumn Statement would have been an ideal time for the Chancellor to consider a further corporation tax cut to 15 per cent.
'In an increasingly competitive global environment, where major players like the US are considering hefty corporation tax cuts, a further cut would have given business a sense of security in a changing world, and positioned Britain as ahead of the curve and truly ‘open for business.'
'The announcement that the government will be raising £5 billion from restricting interest relief and loss relief from large companies also belies the idea that Britain is ‘open for business.’ This penalty appears to be more of a one-size-fits-all measure which will negatively impact large businesses that have incurred bonafide interest charges and losses before paying tax.'
'While the tax cuts aimed at alleviating the fiscal pressures of 'JAMs' will be welcomed in the long term, there could have been more immediate solutions instead—a VAT cut or the immediate (2017) implementation of the £12,500 threshold, for example.
'And in the short term, JAMs will see a negative impact first, being hit by the raise in tax on insurance premiums—from 10 per cent to 12 per cent—from next June.
'Many workers, low income or otherwise, will also be affected by the elimination of salary sacrifice benefits on workplace ‘perks’ such as gym memberships and company cars. This reduction could also lead to greater pressure on other sectors, such as healthcare, in the long term.
'It's positive, however, to see that the Government is sticking to its Manifesto promise to raise the personal allowance threshold and the basic rate band by 2020. And the changes to the Universal Credit taper will allow a longer transition period from benefits to earnings for people who are less well-off – they will be encouraged to work longer hours without being penalised as quickly.'
Budgets – less is more
ACCA welcomes the move to a single Autumn Budget per year.
'While next year will prove onerous with two Budget deliveries, the long term strategy of presenting one Autumn Budget per year is sound. The government will have less opportunity to tinker with tax. ACCA also welcomes the additional opportunity for scrutiny that this settled and simpler timetable will offer.'
'Under the proposed changes, an individual or business who has undertaken tax avoidance and are proved to be incorrect in a court of law will incur a penalty.
'However, under the advance payments regime, the tax would have been paid up front already - which makes an additional penalty unwarranted, and somewhat draconian,' concluded Roy-Chowdhury.