offices at night

What the General Election result means for UK taxes

Jane Mackay, Head of Tax
23/12/2019
offices at night
On 12 December the Conservative government won a strong majority in the General Election. The new government has one overwhelming priority and that is to deliver on its manifesto commitment to ‘Get Brexit Done’ and leave the EU on 31 January 2020, a message reiterated in the Queen’s Speech on 19 December.

Other than Brexit related tax changes, it would be surprising for the Conservative government to introduce radical tax changes now but what happens beyond Brexit remains to be seen. The partners of national audit, tax, advisory and risk firm Crowe react to the main proposals set to inform the tax agenda for the coming months.



Building a fairer taxation system

Ongoing measures to tackle tax avoidance and evasion will include increasing the maximum term for tax fraud to 14 years, strengthening HMRC’s Anti-Tax Evasion Unit and consolidating existing anti-evasion and avoidance measures and powers.

The Conservatives have also confirmed their intention to implement the Digital Services Tax to increase the tax take from major multinational companies.

Laurence Field, Corporate Tax Partner comments:

Laurence Field"Clearly the digitalisation of business has left a mismatch in terms of how an antiquated tax system copes with modern business practices. Digital services taxation is politically attractive even if this causes conflicts with other jurisdictions.

However, with the Conservative election built around ‘getting Brexit done’, this area has become more complex due to the potential shape of any UK-US trade agreement. Given that many of the tech giants that would be impacted by a digital services tax are US companies, there may yet be tension to come between the intention to implement a DST and the need to find a suitable deal with a key international trade partner. All eyes will be trained on February’s Budget announcements, which will come shortly after the UK’s schedule EU departure date.”


Driving costs down and supporting small businesses

While the Prime Minister has decided not to proceed with the planned reduction of corporation tax, he has made no explicit comment on keeping the rate at 19% meaning there could be future increases on the horizon.

Johnathan Dudley, Head of Manufacturing comments:

Johnathan Dudley

"Maintaining corporation tax rates at 19% in the medium term will help manufacturing businesses to plan in these uncertain times. The manifesto related proposal to increase the Structures and Buildings Allowance from 2% to 3% will provide welcome additional tax relief for businesses that invest in manufacturing sites.

The government could give a further welcome boost by providing other tax incentives to manufacturing businesses and exporters. Enhanced tax reliefs or incentives for businesses investing in plant and machinery particularly in robotic or additive engineering capabilities to replace existing reductive engineering technologies would help drive innovation in UK manufacturing. It would be great to see a tax incentive for SMEs to encourage them to start or increase their export activity.”


Backing entrepreneurs and innovation

The government intends to review the definition of research and development and specifically cite investments in cloud computing and data as areas that ought to qualify.

The Conservatives have pledged to ‘review and reform’ Entrepreneur’s Relief (ER) from Capital Gains Tax (CGT) after acknowledging that some measures have fallen short in terms of encouraging business investment.

Rebecca Durrant, Head of Private Clients comments:

Rebecca Durrant

"The Conservatives have implied that ER hasn’t fully delivered on its objectives and so a review of the relief in its current guise looks likely. There has been quite a lot said about the originally projected cost of ER compared to its higher current cost. Entrepreneurs with a disposal in the offing may be keen to transact sooner rather than later.” 


Property market hoping for simplification in February Budget

Manifesto pledges indicate that the new government intends to increase the rate of the Structures and Buildings Allowance from 2% to 3%, although they may not have formally committed to do so. There is a commitment to cut business rates as part of a fundamental review of the system, although no timescale for this has been given. As in interim step, the Government has proposed keeping rates down for 2020/21 and precise details are expected to be confirmed in the next Budget likely to take place in February 2020.

Stacy Eden, Head of Property and Construction comments:

Stacy Eden“Feedback from Crowe’s latest Property and Construction Survey continues to show that simplification of the stamp duty land tax regime and reduction of the compliance burden facing the property sector are the two priority areas where change would be welcome. While increasing property tax allowances and relief for business rates will help, we will look forward to further reforms to achieve the simplification the sector needs.”

 

 

Other known changes and key dates

  • Changes to off payroll working (IR35) come into effect from 6 April 2020. Under the new rules, the responsibility for operating the off payroll working rules will move from individuals to the organisation, agency or other third party engaging the worker.
  • Making Tax Digital will continue with the long-term aim of increasing efficiency. The VAT phase will largely complete in the next year.Current indications are that the first parts of the MTD reform for income tax will probably enter the system in 2021.
  • The UK will formally leave the EU on 31 January 2020 when it will enter a transition period. Businesses should continue with the “no remorse” Brexit planning actions to ensure they are ready.

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Jane Mackay
Jane Mackay
Partner, Head of Tax
Thames Valley