Spring Statement 2018
We were promised no tax changes in the Spring Statement and the Chancellor has delivered on this promise. The purpose of the Statement was to provide an update on economic forecast which the Chancellor did with positivity: in his words a Tigger not an Eeyore.
In total 13 consultations were announced but no changes to tax that would imminently affect businesses and tax payers alike. The consultations cover various areas such as the digital economy, tackling the plastic problem, entrepreneurs’ relief, business rates but with a heavy tilt towards trending VAT issues. Two key areas of interest are summarised herewith.
In the Autumn Budget 2017, a proposal was announced to deal with the situation where an individual’s entitlement to the special 10% rate of capital gains tax being lost when an entrepreneur’s company issues new shares and as a result causes their personal stake to fall below 5%. A consultation document was released today proposing to allow an individual in this position to elect to be treated as if they had disposed of their shares and reacquired them at their market value just before the time the company issued new shares. It is being suggested that the individual may claim Entrepreneurs’ Relief on that gain either at the time of election, or on a future disposal of shares. The consultation closes on 15th May.
A call for evidence in relation to the VAT registration threshold was also made today. In the forward to the document, Mel Stride states ‘The UK has a high VAT threshold for a reason. It has the benefit of keeping the majority of small businesses out of VAT altogether, therefore helping our small businesses avoid the administrative burden of accounting for VAT. However, there is growing anecdotal, academic and data-based evidence that the cliff-edge nature of the VAT threshold acts as a disincentive for small business owners who want to expand.’
Philip Hammond had hailed the forecasts that the UK economy had grown at a slightly faster rate than predicted in November and that borrowing was down. Instead, the Shadow Chancellor, John McDonnell said, growth in the UK economy "was among the lowest in the G7 and the slowest since 2012". In conclusion, what was very clear after having heard John McDonnell’s response to the Commons, was that he and Philip Hammond’s perspectives on the UK’s economic forecasts are poles apart.