Budget: Comment

Brexit sidestepped as Mackay’s response awaited

Philip Hammond gave us a confident, relatively positive and, at times, witty Budget speech, though the uncertainty and fear over the impact of Brexit was largely brushed aside.

Whilst there were a lot of tweaks and early Christmas gifts handed out to the young, the innovative risk-takers and the public and private sector, the elephant in the room remains: what is Brexit going to cost the country and how attractive will Britain be to do business in and from after the divorce?

There may be no answers as yet, but what I’d have welcomed yesterday was an indication that the Government is engaging and listening to our biggest employers and global businesses to ensure that they don’t flee.

The stability on VAT and corporate tax rates was welcomed, also it’s unusual in any Budget where there are giveaways for the financial services sector not to be hit with an additional tax burden to pay for this. Maybe Mr Hammond is listening and knows how important it is for London and the wider UK to retain its strong position in this sector post Brexit.

Closer to home, it was long overdue to hear of support for the North Sea oil and gas industry with tax incentives being put in place to encourage investment in mature fields and new entrants to make decommissioning projects more commercially viable.

The Government’s vision of rebuilding the British workforce from base level to make them technologically smart and leaders in the digital revolution plays well into the direction of travel of many start up technology and traditional businesses evolving in Scotland.

Scotland is already leading innovation across all business sectors and the availability of R&D tax credits and investor tax reliefs available through the various venture capital schemes is often critical for their viability. The announcements yesterday to support and enhance these tax reliefs for risk-taking entrepreneurial businesses was welcomed.

Changes announced for overseas owners of commercial property to be taxed on both income and capital gains could have a dramatic impact on the commercial property market.

The devil will be in the detail of the legislation that we have yet to see. Possibly this was a last minute addition to the Budget post the recent Panorama coverage on the Paradise Papers where perfectly legal offshore property structures were publicly revealed.

The rabbit in the hat was Stamp Duty Relief on property up to £300,000 for first time buyers. This will boost housebuilders south of the border and we eagerly await Derek Mackay’s response when he reveals the Scottish Budget on 14 December.

Will the cat and mouse game continue, or could Scotland go further than this and overhaul the equivalent Land and Buildings Transaction Tax that now applies north of the border? And what will he do on income tax rates and bands. Will he be brave and bold and diverge from Westminster?

Susie Walker is head of tax at Johnston Carmichael

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