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Hammond goes for light touch tax policies

graeme-cranAs both a tax professional and a tax payer, the Budget and Autumn Statement can have a professional and personal impact.

From a professional point of view I welcome the Chancellor’s plan to abolish the Autumn Statement and revert to one fiscal statement a year, but I can’t say I’m overly happy at the prospect of having to pay tax on my employer-provided mobile phone!

The Chancellor’s first speech contained very little in the way of new or significant tax policy and the focus will almost certainly be on the revised economic and borrowing forecasts.

The proposal to abolish salary sacrifice arrangements may panic many but in reality it will only impact a small percentage of the workforce.

The more common salary sacrifice arrangements such as employer pension contributions, child care vouchers and the cycle to work scheme will remain protected.

However, those who receive benefits such as a mobile phone or an annual health check via their employer will have to pay tax on these benefits from April 2018.

The announcement that garnered the most headlines in advance of the Chancellor’s Statement was the plan to ban letting agents from charging tenants directly for various administrative services such a credit and reference checks.

They will only impact letting agents south of the border as the Scottish government introduced a similar policy back in 2012.

The government’s pre-election promise to increase the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the parliament will be retained.

This will provide a direct tax saving for the vast majority of taxpayers over each of the next three years. We await the budget from the Scottish government on 15 December to see if the same will apply to Scottish resident taxpayers.

Despite making glowing reference to his predecessor during his speech, Mr Hammond not only abandoned George Osborne’s spending objectives for the remainder of the parliament but also reversed the tax benefits applicable to one of his flagship policies.

The Employee Share Scheme was introduced in 2013 to incentivise employees to take up shares in their employer in exchange for waiving certain employment rights. Mr Hammond believes such schemes are being used for tax avoidance purposes and has therefore revoked the income and capital gains tax benefits from 1 December.

As is always the case with a Budget statement, the devil is in the detail and this statement is no different. When the Chancellor referenced “rapidly rising incorporation and self-employment” as a contributing factor to the erosion of taxable revenues, it was clear that action would be taken to try to counteract the perceived impact.

Mr Hammond has announced that the government will consult on how different ways of working are taxed and whether that is fair. This sounds ominous given that the OBR projects the loss of tax revenues from incorporation to be in excess of £3bn.

With the corporation tax rate dropping to 17% from 2020, there may be even more incentive to incorporate for certain self-employed traders and partnerships. We await the publication of the consultation to determine the precise impact and scope.

An Autumn Statement that was light on new tax policy, which is a welcome change. I now just need to dig out my Pay As You Go Nokia 3210.

Graeme Cran is a Senior Tax Manager, Johnston Carmichael

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