Mike Stott, DSG, comments on last week's budget
Well, what a day. It takes me back to four or five years ago when there was a hive of activity running up to, during and after budget day. Last week, I attended a Chamber of Commerce round table budget discussion, had an interview for TV, an interview for radio and then a fast walk, at HS2 pace, back to the office for a meeting with a client.
This was the first wholly Conservative budget in 19 years. I must admit that I seem to remember Labour’s 1997 July budget having more of an impact on me than this budget. In saying that, there were two announcements which I wasn’t expecting today:
-The reduction in the headline rate of corporation tax from 20% to 18%. 10 years ago, countries with headline rates of corporation tax of 18% were treated with suspicion and UK companies with overseas subsidiaries in such jurisdictions were subject to additional tax compliance and potentially additional tax. Now we seem to be one of the lowest rates in the developed world.
-A change to the taxation in dividends, which is likely to result in an increase in the tax arising on dividends.
In both interviews, I was asked the question how I think employers will react to the implementation of a national living wage? Obviously, this will be an additional cost to employers who employ lower paid employees, at a time when those employers are likely to be incurring further cost in the form of auto-enrolment pensions for their employees. It is a fairly hefty increase, and will continue to rise until 2020. We haven’t worked out the numbers yet but there will also be savings for employers in lower corporation tax, although this will only be of benefit to those companies with taxable profits, and an increase in the Employment Allowance.
The Chancellor announced he would give more resource to HMRC to help him achieve £5billion in extra tax through a focus on “tax avoidance, evasion and aggressive tax planning”. This is an interesting choice of words and perhaps sheds some light on the Government’s desire to clamp down on “aggressive tax planning” even though aggressive tax planning is perfectly legal. I think that a better choice of words might have been “legal but immoral with no commercial substance” tax planning. Given the changing landscape on tax planning, I wouldn’t be surprised if the Government focus on areas which were once deemed to be perfectly acceptable forms of tax planning.
I hadn’t heard it said for a good few years that “The devil is in the detail” when commenting on the budget. I have heard the phrase used, and have also used it a number of times today. It is definitely the case with this budget. Right, I had better go and read the detail...