Craig Hughes – Private Client Partner
This year’s budget is as tricky as ever; balancing the books, increasing tax revenues to help ensure a level of economic buoyancy to take us through Brexit, but at the same time needing to remain competitive if not indeed attractive both personal and corporate tax perspective.
As we near Brexit, the UK must adopt tax policies which seeks to keep HNWs in the UK, seeks to attract HNWs and skilled workers from overseas to the UK and continues to show that the UK is open for business (through policies for entrepreneurs’ and corporates).
Taxation of self-employed individuals
Philip Hammond clearly has a deep routed belief that that taxation of self-employed individuals needs a rethink. He has tried to change the system previous (in 2017) but was forced to U turn by the next morning, and more recently he has announced that he is going back on the Government’s pledge to abolish Class 2 National insurance in a move which will raise an extra £435 million a year.
While I remain convinced that Hammond would advocate an overhaul of the system for self-employed, I predict that there will not be any further changes for this year as simply we will need the entrepreneurial spirit over the coming months. Self-employed individuals stand on their own two feet, they risk their own capital and are very much the backbone of Britain. It is a sector which should be encouraged and supported rather than penalised by successive attempts to tighten the tax landscape that affects them.
From an offshore perspective, having introduced a series of legislative changes affecting non-doms and offshore trusts, we would welcome a period of stability and no further changes. The non-dom system remains to be competitive and can certainly help attract people to the UK especially for the first 7 years. The recent changes which introduced the concept of deemed domiciled for all tax purposes for those who have lived in the UK for 15 out of 20 years is just and reasonable and needs no further tinkering. However, the area that I would predict further changes is a continuance and extension of the powers of HMRC to investigate offshore tax matters and a reinforcement of the punitive penalty regime brought in under the requirement to correct.
Non-UK residents investing in the UK
An area which I would expect to change is the tax policy for non-UK residents investing in the UK. The underlying sentiment is that people are struggling to get on the property ladder as the average property prices have been pushed up significantly by overseas buyers who are motivated by achieving capital growth or having a ‘trophy’ assets such as London property. The introduction of NRCGT ensures that HMRC will at least get their fair share of tax receipts on the sale of the property. However, to get a higher slice of tax upfront, it is expected that the government will take this one step further by introducing higher rates of SDLT for foreign buyers of UK property.
Other areas in which I am hopeful of change include:
- Further relaxation of business investment relief to encourage non-UK domiciliaries to invest in the UK.
- Extension of Entrepreneurs relief once again to encourage investment in the UK.
- Extension of the application of EIS/SEIS, and social enterprises – once again to encourage investment in the UK.
- At some point I would anticipate a fundamental shake up to pensions but I would say that there are other key areas for this year such that no changes for pensions this year.
Overall, the message for this budget has to be one of stable and consistent policy which aims to keep the UK competitive, driving forward business and the people behind those businesses. In a period of uncertainty it would be unwise to have radical tax policy changes; I would therefore expect to see a number of ‘stealth changes’ (increase in insurance premium tax, fuel duty, u turn on abolition of class 2 nic for self employed etc) rather than fundamental headline changes.