Autumn Statement 2015 Agricultural Update

08 December 2015

08 December 2015 by MHA MacIntyre Hudson

Autumn Statement 2015

Impact on Agriculture

Whilst the Autumn Statement dealt mostly with Government spending, there were a couple of issues which looked at the other side of the tax equation. Commentators are already wondering how, or indeed whether, the sums add up, but an analysis of the proposed tax reforms may shed some light on this. 

Firstly, the proposal that CGT on residential property sale be accelerated seems to have little impact on the overall tax take at present and one almost wonders what the point of it may be, unless it is putting a mechanism in place which might be capable of expansion in the future – perhaps to accelerate the payment of CGT on other transactions or to presage a reduction in some of the existing CGT reliefs.

The other change concerns the implementation of more regular tax returns by the self-employed under the new “digital tax system”. There is an announcement that the government will “by 2020, require most businesses, self-employed people and landlords to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account” this is prior to a consultation” on options to simplify the payment of taxes, including whether to align payment dates and bring them closer to the point when profits arise, so that taxpayers make a single regular payment that covers all their tax affairs”. So this appears to mean that, probably by the end of this Parliament, a process will be in place meaning that, most of those who now submit SA Returns and small companies will be required to do something quarterly for Income Tax or Corporation Tax purposes. Despite what the Treasury might think, small business accounts are not generally sufficiently robust enough to determine tax on a quarterly basis (unless they are doing quarterly stocktakes and preparing tax computations) so this seems to foreshadow a process of proper quarterly accounting with a concomitant increase in professional costs – unless one is confident that  the free software which the government will provide is capable of counting the stock as well as accurately calculating the tax payable. 

This leads on to the crux of the matter. Why do we need quarterly Tax Returns (or “updates” if you prefer the term) when the tax is payable by half yearly instalments in arrears? Could it be that by 2020 the tax gap which some commentators are foreseeing will be closed by an acceleration of the whole self-employment and small company tax take “to align payment dates”. Are the CGT changes the first sign of this? Time will tell, no doubt, but George Osborne is  a clever man – devious perhaps, but not stupid, and in the context of creating revenue without actually raising the headline tax rates this may be the first step in a longer term plan.

To discuss this or anything else please contact Sarah Dodds on 01733 568491 or email sarah.dodds@mhllp.co.uk

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