For a brief moment, it was possible to see the 2019 Spring Statement as a rare chance for the May-led government to relax and pretend that they are a united and happy bunch forging a bright new future in a Britain uncontaminated by Brexit worries.
So the Chancellor started with the good news. He treated us to a roll call of the government’s economic and other achievements, wasting no opportunity to contrast the former with the last Labour government’s record. As regards the latter he ranged widely over infrastructure, science and technology, climate and housing and pulled three spending rabbits out of his hat – to tackle knife crime and late invoice payments and provide free sanitary products for schoolgirls.
As to the future, he made no reference to an early Budget this year commenting that his next challenge would be a comprehensive spending review leading up to the Autumn Budget.
But Brexit could not be ignored. The Chancellor bemoaned the previous day’s defeat in Parliament and said it would extend the ‘cloud of uncertainty’ besetting businesses. It would also delay and could reduce the ‘Deal Dividend’ he anticipated.
He outlined the plans that are in place to cope with a no-deal Brexit by:
- minimising disruption to the financial system;
- introducing border mitigations on the UK side;
- publishing a temporary tariff schedule; and
- ensuring the fiscal and monetary tools are available.
On tax there was hardly anything in the speech. The supporting written ministerial statement was more forthcoming and it introduced some interesting documents.
Making Tax Digital
A delay of sorts to Making Tax Digital (MTD) has been announced. Importantly, the headline start date remains 1 April 2019 – i.e. some two weeks away – for MTD for VAT (MTDfV) where the business has taxable turnover above £85,000. However, the earliest possible start date from which MTD may be made mandatory for other taxes and businesses has been pushed back. Previously, the Government had said that MTD would be extended sometime after April 2020. The Government has now confirmed that MTD will not be made mandatory for any new taxes or businesses until 2021 at the earliest. The reason given for the delay is to allow the Government to focus on helping businesses to transition to MTDfV. Also, the Government has taken the opportunity to confirm a one-year soft landing period for filing and record-keeping penalties where a business has done its best to comply with MTD.
Structures and buildings allowances
Draft legislation on the structures and buildings allowance was published for consultation alongside the Spring Statement 2019. The consultation closes on 24 April 2019. It is planned that the resulting Statutory Instrument will be debated by Parliament ahead of the summer recess before being made by affirmative resolution. Although the legislation is still some months away, it will apply to eligible costs incurred on or after 29 October 2018, providing relief for qualifying expenditure at a flat rate of 2% pa over a 50-year period. Changes to the allowance as originally detailed in the technical note published at the Budget on 29 October 2018 include:
- the continuance of allowances during periods of disuse;
- demolition being treated as a disposal event for capital gains purposes, with any unrelieved expenditure being claimed as a deduction in the resulting capital gains computation;
- separate rules for leases that are wasting and non-wasting assets, to ensure that all eligible expenditure is relieved, and to avoid double relief.
The Government has published a 62-page summary of its approach to tax avoidance, evasion and other forms of non-compliance. This is considered under three headings:
- HMRC’s strategic approach;
- the Government’s approach to addressing tax avoidance, evasion and other forms of non-compliance; and
- investment in HMRC and a commitment to further action.
Also included is a list of measures announced since 2010.
Offshore tax compliance
This document, under the heading ‘No Safe Havens 2019’ sets out how HMRC will ensure offshore tax compliance by focusing on:
- leading internationally;
- assisting compliance; and
- responding appropriately.
The Government announced a wide-ranging review of aggregates levy and is inviting representations from interested parties on those aspects of the levy which are working well and those which are not. The closing date for written submissions is 5 July 2019.
Aggregates levy was introduced as an environmental tax in 2002. The levy taxes virgin aggregate which is removed from the ground, dredged from the sea or imported and commercially exploited. The current rate is £2.00 per tonne and there are various reliefs and exemptions. In 2002, just over 20% of the aggregate used in the UK was (untaxed) recycled or secondary aggregate; in 2017, this had risen to 30%, which suggests that the tax is achieving its environmental objective. In Europe the average use of recycled or secondary aggregate is only 10%.
There have been various challenges to the legality of the levy and the European Commission has considered whether the levy contained state aid (illegal under the EU rules). As these challenges have now ended and the legality of the tax is confirmed, the Government has decided that now is a good time to review the workings of the tax. One of the aims of the review is to establish what scope there is to devolve the levy to the UK’s national parliaments and assemblies.
Future tax announcements
More is promised over the ‘coming months’:
- by 30 March 2019, a report under FA 2019, s. 95 on the recovery of lost tax involving an offshore matter, including rationale behind the disguised remuneration loan charge;
- call for evidence on social investment tax relief;
- consultation on abuse of research and development tax relief;
- operational review of insurance premium tax;
- Treasury finding on the Isle of Man’s VAT administration processes regarding the importation of aircraft and yachts;
- draft regulations on offshore receipts in respect of intangible property;
- draft regulations on hybrids and other mismatches;
- draft legislation on minor changes to general anti-abuse rule legislation;
- draft legislation on the reforms to NICs employment allowance;
- draft regulations on maturing child trust funds;
- policy paper on simplifying VAT and the public sector;
- call for evidence on potential simplification and improvement of VAT partial exemption and the capital goods scheme;
- Government response on review regarding vehicle excise duty and company car tax;
- consultation on the use of diesel by private pleasure craft;
- guidelines and draft legislation for enterprise investment scheme and approved funds;
- consultation on announced changes to private residence relief;
- technical note on the structures and buildings allowance;
- consultation on announced restrictions on set-off of corporate capital losses;
- consultation on aligning consideration rules for stamp duty and stamp duty reserve tax;
- consultation on new digital services tax;
- call for evidence on simplifying the process for amending a tax return;
- consultation on HMRC’s secondary preferential creditor status.
We will cover these in our Tax Briefing and Tax Update e-alerts as they are published.
By the end of his speech, Brexit had completely taken over. In full political mode and with some passion, he appeared to endorse a way ahead at odds with that of his boss. This and subsequent events in Parliament put the other aspects of the Spring Statement 2019 in heavy shadow – as widely expected
The Tax Content Team at Croner-i.
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