Garbutt + Elliott Budget 2017 predictions


Ahead of one of the most-anticipated Budgets in recent history, Garbutt + Elliott share their predictions on what Philip Hammond will reveal on November 22.

General comments

With the Conservative party still reeling from June’s General Election, and bruising Brexit negotiations ongoing, the UK economy remains fragile. Philip Hammond’s Budget on Wednesday is one of the most eagerly anticipated for some time.

Self-employed VAT changes

In his Spring Budget, the Chancellor’s plans to increase self-employed National Insurance contributions and bring them more in line with the employed were thwarted, and resulted in an embarrassing U-turn.

This time around, with new recommendations from the Office of Tax Simplification (OTS) behind him, it’s expected that a reduction in the VAT threshold could help the Treasury recover contributions from the self-employed

Some say there’s an inherent logic in bringing the current threshold of £85,000 closer in the line with the average VAT rate paid across the EU of £25,000, but such a move would meet strong resistance and the Chancellor can’t afford another front-page U-turn on a major self-employed tax policy

IR35 reform

Contractors and sector experts have been calling for changes to the Government’s imperfect IR35 regulations since it was introduced in 1999. The regulation was set up to prevent tax avoidance by workers supplying client services through an intermediary, but has been dogged by poor delivery

The IR35 rules were changed for those working in the public sector from April 2017, a move that is expected to significantly transform IR35 compliance levels. It’s expected that Philip Hammond may look to extend these off-payroll rules into the private sector to regain more tax for the Treasury

But the original IR35 reform was focused on tackling disguised employment in the public sector, so if Philip Hammond wants to roll-out the regulation to private-sector workers it’s likely he’ll need to announce a lengthy consultation first

Stamp Duty Land Tax (SDLT)

Property landlords have suffered a series of major and detrimental tax changes in recent years

A 3% SDLT surcharge was introduced on the purchase of buy-to-lets and second homes in April 2016, followed by a restriction of tax relief on finance costs for residential landlords in April 2017

Despite strong opposition to SDLT increases and mortgage interest relief changes, most people don’t expect any real movement to relieve some of the pressure within the private rental sector

The Chancellor has much on his plate with the wider economy, so many expect he may introduce measures for housebuilders and first-time buyers rather than providing any real assistance for landlords.

“Kebab tax”

Rob Durrant-Walker, said: “We can look forward to Philip Hammond making a great play on his environmental credentials by unveiling his widely-expected tax on unrecyclable takeaway trays.”

Reducing the tax-free dividend allowance

It is expected that the tax-free Dividend Allowance will be reduced from its current £5,000 threshold.

The downside of this would be that many small investors like pensioners are reliant on small share portfolios and would end up having to complete self-assessment tax returns every year.

Film finance

There are some early signals from HMRC that the Government might have filmmakers in their sights and reduce some of their incentives.

This is to crack down on a trend of one-off filmmakers who set up a company and incentivise investors to fund it, all the while taking advantage of incentivised tax schemes such as the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS).

So, while the Government wants to support the industry with film tax credits, Philip Hammond might look to reduce EIS and SEIS relief for ‘film angels’ and other angel investors.

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