Brian Palmer, Tax Policy Expert at AAT (Association of Accounting Technicians), shares his thoughts ahead of today’s Budget 2017
Britain’s waited 21 years for an Autumn Budget, and all eyes will be on the dispatch box today (Wednesday, 22 November) to see if Philip Hammond will deliver the bold and convictive Budget the nation craves.
Undoubtedly hampered by poor productivity forecasts and the looming spectre of Brexit, Hammond needs to make leaps forward from some rather tame Budgets and Statements of recent years to convince many he is the right man to lead the country’s finances through choppy and uncertain waters.
Not least, this includes Britain’s 5.5 million small businesses, the lifeblood and heartbeat of our economy. Many SME owners have been hampered by rising business rates back in April, and while the long-awaited transition of the country to digital taxation has been put back to 2020 for the very small businesses, it is still looming large and businesses need to start preparing for it. Throw in the introduction of the General Data Protection Regulation (GDPR) in May 2018, and there’s a lot for SME owners to get their heads around in a short space of time.
Breathing space would be handy, and we can but hope the Chancellor heeds calls from the Federation of Small Businesses (FSB) to rule out any further increases to business tax. Furthermore, calls for the Chancellor to U-turn on his pledge to reduce corporation tax to 17% by 2020, indicating decreases are around the corner, may need to be ignored to maintain business confidence, even if this does contribute to a £4bn hole in public finances.
The fact that productivity is lower than previously thought means there isn’t much wriggle-room for the Chancellor to promise swathing tax cuts. We believe that, in general, he should go after the root cause of the problem and introduce initiatives to help improve productivity in Britain’s businesses.
This could include the extension of the new Apprenticeship Levy so that it can also help upskill existing staff. In addition, the Government should look to ensure that the level of apprenticeship completions – not starts as previously mooted – rise to provide the nation with a new generation of work-ready, highly skilled employees who can aid businesses of all sizes.
With the Chancellor keeping his cards very close to his chest, there’s been precious few rumours as to what he is likely to include currently circulating. The most persistent appears to be one suggesting he is on the verge of reforming the VAT system. This would be particularly odd timing if he chose to do so – VAT is, after all, governed by European legislation and as such will likely be further reviewed after our March 2019 withdrawal from the EU.
Furthermore, after the debacle – and eventual U-turn – over a National Insurance rise from this year’s Spring Budget, would Hammond now feel sufficiently brave to rise to the challenge set by the Office of Tax Simplification, by dropping the VAT registration threshold to the European average of £20,000?