The Spring Statement provided confirmation that the uncertainty over Brexit has hit business investment and growth, with GDP growth predictions decreasing from 1.6% at the budget to 1.2%. Business investment and growth are forecast to start growing again from next year with GDP growth of 1.4% for FY20, then 1.6% for FY21, FY22 and FY23.
For more information about Menzies LLP or to talk to us about the impact of the 2019 Spring Statement on your business and finances, contact your Menzies Relationship Partner.
Here follows a summary of the key talking points from the Chancellor’s announcement.
The UK remains ‘open for business’
The Chancellor continued his theme of reassuring the world that the UK is open and attractive for business, with:
- Announcements on spending on his favourite themes of productivity, infrastructure, skills and technology
- Improvements to immigration rules, including removing PhD level occupations from the cap on high-skilled visas
There will be consultations on a series of measures designed to promote the UK’s shift to a clean economy. These include:
- Helping businesses improve the way they use energy – a call for evidence on a Business Energy Efficiency Scheme
- A review of the economics of biodiversity – with the aim of introducing mandatory net gains for biodiversity on any new developments in England
Making Tax Digital (MTD)
The Chancellor confirmed that there will be a light touch approach to penalties in the first year of implementation. Where businesses are doing their best to comply, no filing or record keeping penalties will be issued. The focus will be on supporting businesses to transition. The government will therefore not be mandating MTD for any new taxes or businesses in 2020.
“Confirmation that there will be no new taxes pulled into #MakingTaxDigital during 2020 will come as a relief to many – many perceive that #MTD for #VAT has been poorly communicated and delivered by HMRC.”
Structures and Buildings Allowance – the government has provided clarification on a number of issues concerning the implementation of this new capital allowance, introduced by the government at the budget to provide tax relief on the construction of new commercial buildings and structures. They are now inviting comments on the final draft legislation before it becomes law.
Enterprise Investment Scheme (EIS) approved funds guidelines – last year, the Government consulted on the introduction of an EIS fund structure, designed to encourage longer term investment in high-tech or capital intensive companies that need ‘patient capital’. We now expect to see draft legislation and guidelines released for comment later this year. This document will contain guidelines stating HMRC’s proposed policy and practice for approving funds. The legislation will include powers for HMRC to set appropriate conditions and approve funds.
Competition in the digital economy – following the announcement of the Digital Services Tax at the Budget, the Chancellor welcomed the recent review into competition in the Digital economy, which called for a shake-up of competition rules to counter increasing dominance by tech giants. The Government plans to respond later this year.
Tackling Tax Avoidance
The government is set to continue its fight against tax avoidance, with new consultations launched on:
- Tackling tax avoidance, evasion and other forms of non-compliance
- Offshore tax compliance strategy: No Safe Havens 2019
- Preventing abuse of the R&D tax relief for small- or medium-sized enterprises (SMEs)
Simplifying the Tax System
Further consultations will look at simplifying the tax system:
- VAT Partial Exemption and Capital Goods Scheme: Simplification – A call for evidence on potential simplification and improvement of the VAT Partial Exemption regime and the Capital Goods Scheme – ensuring they are as simple and efficient for taxpayers as possible
- Social Investment Tax Relief (SITR) – A call for evidence on the use of the SITR scheme to date, including why it has been used less than anticipated and what impact it has had on access to finance for social enterprises. [N.B. This may be the first step to repealing this relief if it is not being used]
- Infrastructure Finance Review