Tax professionals comment on the uncertainty surrounding UK tax policy following the results of the general election.
‘Not only do we have a hung parliament, but we will have a new financial secretary to the Treasury,’ said Tina Riches, national tax partner at Smith & Williamson. ‘Given that Jane Ellison, who as the previous post-holder had embraced the role, has lost her parliamentary seat, we will no doubt have a period of uncertainty while a new minister is appointed and gets up to speed in providing strategic oversight of the UK tax system.’
Riches expects the previous policies on tax to continue for the moment, given that the Conservatives have the largest number of seats in the House of Commons. ‘However, key votes are likely to require support of some members of other parties, so there may be some moderation in stances taken.'
'[The Conservatives] will wish to implement as much as they possibly can, where they are confident the DUP will support them,' said Brian Palmer, tax policy adviser at the ATT. 'Everything is up for grabs.'
‘A hung parliament introduces new uncertainties from a tax perspective,’ agreed Cathryn Vanderspar, partner and head of tax at Eversheds Sutherland. ‘At this stage, it is impossible to predict which direction things will take. Will we, for example, still see the reduction of corporation tax rates to 17% in 2020, that the Tories had planned, or will rates move in the opposite direction, possibly with further incentives for smaller companies?’
Richard Woolich, UK head of tax at law firm DLA Piper, thought that, subject to the demands of the Unionists, the Conservatives should be able to maintain their drive for low corporate taxes, and no increases in income tax for the higher paid. ‘The planned reduction in corporation tax from 19% to 17% in 2020 should go ahead, subject to the state of public finances, and subject to any deal done with the EU as part of the Brexit negotiations,’ he said.
The reduction in corporation tax to 17% from 2020 ‘must be in doubt’, thought James Ross, partner at McDermott Will & Emery. ‘In the short term, the election result will inevitably create uncertainty about the direction of corporate tax policy. However, it probably also increases the likelihood of a "soft" Brexit, so groups worried about losing the benefit of EU Directives to minimise withholding tax on intra-group interest, dividend and royalty payments may want to hold fire before unwinding their UK holding company structures.’
Several practitioners commented on the need for clarity over the fate of the ‘deferred’ Finance Bill provisions. These provisions include major corporate tax reforms, such as changes to the interest deductibility rules and limits on the use of carry forward losses. The continuing uncertainty on these rules ‘has put UK Plc in a really awkward position,’ said Heather Self, partner at Pinsent Masons. The interest deduction restriction rules are of particular concern: 'they are complex and will have a major impact on UK groups.’
‘It had been hoped that we would get confirmation soon after the election of what provisions would be in the next Finance Bill and when they would take effect,’ Self said. The rules are expected to revised in light of comments on the earlier draft, but ‘until the Bill is published and has gone through the parliamentary process, we still do not know exactly what the legislation will say.’
It is not just companies who are affected by the deferral of key provisions in the earlier Finance Bill. ‘All taxpayer groups had been hoping the election would grant a degree of clarity and stability, none more so than non-domiciled individuals,’ said Lucy Brennan, partner at Saffery Champness.
‘After a long period of being pushed from pillar to post, the Finance Bill seemed to offer at least a workable structure that could be planned for – with HMRC promising the changes would be implemented,’ Brennan said. ‘With that firmly in the long grass, non-doms are stuck in limbo again. Some aspects of the reforms, such as the deemed domicile policy, could legitimately be deferred, but this would be less palatable for others, such as CGT rebasing, where individuals have already started planning on HMRC’s insistence that the legislation would be in place from 6 April 2017. Of course, the murky world of coalition or minority government may throw up further hurdles, with many of the parties taking very different cultural and political views on the non-dom question.”
And what of plans for making tax digital? Andrew Hubbard, tax consultant with RSM, said: ‘The timetable was already under considerable pressure before the election but now there are two additional factors to consider. First there is the possible agreement with the Democratic Unionist Party that is known to have considerable reservations about some aspect of making tax digital; particularly the access problem that individuals in the rural parts of Northern Ireland have to high speed broadband.
‘Second is the fact that the minister with day-to-day responsibility for HMRC – Jane Ellison – lost her seat in the election,' Hubbard said. 'Her successor Mel Stride, who has only just been appointed, will presumably want to review the MTD programme before making any final decisions about the timetable.’
Reported by Paul Stainforth
Tax professionals comment on the uncertainty surrounding UK tax policy following the results of the general election.
‘Not only do we have a hung parliament, but we will have a new financial secretary to the Treasury,’ said Tina Riches, national tax partner at Smith & Williamson. ‘Given that Jane Ellison, who as the previous post-holder had embraced the role, has lost her parliamentary seat, we will no doubt have a period of uncertainty while a new minister is appointed and gets up to speed in providing strategic oversight of the UK tax system.’
Riches expects the previous policies on tax to continue for the moment, given that the Conservatives have the largest number of seats in the House of Commons. ‘However, key votes are likely to require support of some members of other parties, so there may be some moderation in stances taken.'
'[The Conservatives] will wish to implement as much as they possibly can, where they are confident the DUP will support them,' said Brian Palmer, tax policy adviser at the ATT. 'Everything is up for grabs.'
‘A hung parliament introduces new uncertainties from a tax perspective,’ agreed Cathryn Vanderspar, partner and head of tax at Eversheds Sutherland. ‘At this stage, it is impossible to predict which direction things will take. Will we, for example, still see the reduction of corporation tax rates to 17% in 2020, that the Tories had planned, or will rates move in the opposite direction, possibly with further incentives for smaller companies?’
Richard Woolich, UK head of tax at law firm DLA Piper, thought that, subject to the demands of the Unionists, the Conservatives should be able to maintain their drive for low corporate taxes, and no increases in income tax for the higher paid. ‘The planned reduction in corporation tax from 19% to 17% in 2020 should go ahead, subject to the state of public finances, and subject to any deal done with the EU as part of the Brexit negotiations,’ he said.
The reduction in corporation tax to 17% from 2020 ‘must be in doubt’, thought James Ross, partner at McDermott Will & Emery. ‘In the short term, the election result will inevitably create uncertainty about the direction of corporate tax policy. However, it probably also increases the likelihood of a "soft" Brexit, so groups worried about losing the benefit of EU Directives to minimise withholding tax on intra-group interest, dividend and royalty payments may want to hold fire before unwinding their UK holding company structures.’
Several practitioners commented on the need for clarity over the fate of the ‘deferred’ Finance Bill provisions. These provisions include major corporate tax reforms, such as changes to the interest deductibility rules and limits on the use of carry forward losses. The continuing uncertainty on these rules ‘has put UK Plc in a really awkward position,’ said Heather Self, partner at Pinsent Masons. The interest deduction restriction rules are of particular concern: 'they are complex and will have a major impact on UK groups.’
‘It had been hoped that we would get confirmation soon after the election of what provisions would be in the next Finance Bill and when they would take effect,’ Self said. The rules are expected to revised in light of comments on the earlier draft, but ‘until the Bill is published and has gone through the parliamentary process, we still do not know exactly what the legislation will say.’
It is not just companies who are affected by the deferral of key provisions in the earlier Finance Bill. ‘All taxpayer groups had been hoping the election would grant a degree of clarity and stability, none more so than non-domiciled individuals,’ said Lucy Brennan, partner at Saffery Champness.
‘After a long period of being pushed from pillar to post, the Finance Bill seemed to offer at least a workable structure that could be planned for – with HMRC promising the changes would be implemented,’ Brennan said. ‘With that firmly in the long grass, non-doms are stuck in limbo again. Some aspects of the reforms, such as the deemed domicile policy, could legitimately be deferred, but this would be less palatable for others, such as CGT rebasing, where individuals have already started planning on HMRC’s insistence that the legislation would be in place from 6 April 2017. Of course, the murky world of coalition or minority government may throw up further hurdles, with many of the parties taking very different cultural and political views on the non-dom question.”
And what of plans for making tax digital? Andrew Hubbard, tax consultant with RSM, said: ‘The timetable was already under considerable pressure before the election but now there are two additional factors to consider. First there is the possible agreement with the Democratic Unionist Party that is known to have considerable reservations about some aspect of making tax digital; particularly the access problem that individuals in the rural parts of Northern Ireland have to high speed broadband.
‘Second is the fact that the minister with day-to-day responsibility for HMRC – Jane Ellison – lost her seat in the election,' Hubbard said. 'Her successor Mel Stride, who has only just been appointed, will presumably want to review the MTD programme before making any final decisions about the timetable.’
Reported by Paul Stainforth
