Autumn statement 2016 in review
New chancellor Philip Hammond gave his first (and last) autumn statement, which he succinctly described as, "it's complicated, but it's good news." We asked Lancashire business leaders whether they agreed.Headline announcements included:
- An end to twice-yearly announcements. The budget will now be set in autumn, with a report on progress in the spring.
- A slowing of growth, from 2.1 per cent in 2016 to 1.4 per cent in 2017.
- A £400m contribution into the Northern Powerhouse Investment Fund.
- A £23bn National Productivity Investment fund available for research, development and innovation.
- Corporation tax to reduce from 20 per cent down to 17 per cent by 2020.
- National Living Wage to increase from £7.20 per hour to £7.50 per hour from April 2017.
- Salary sacrifice benefits to be removed from April 2017, except for exempt arrangements.
Damian Broughton, executive chairman, Danbro:
“Despite reviews into modern employment being launched by the government and other bodies like PRISM, this Autumn Statement has punished contractors again. These key workers are increasingly being taxed like employees, but have none of the benefits."One of the key outcomes of the Autumn Statement was a decision to forge ahead with IR35 reforms in the public sector which will see the recruitment agencies or organisations who engage the worker having to decide whether they fall under intermediaries legislation. HMRC estimates 90 per cent of the 20,000 people who operate as contractors in the public sector will be caught out.
"The chancellor also said the five per cent tax-free allowance would be removed as workers no longer had the administrative burden of deciding their status.“People who provide freelance skills to public sector bodies will now have to change the way they operate and, for many, work through an employment business as there are fewer incentives to have your own company. The likelihood is that these rules will also soon be applied to the private sector.
“If penalising contractors and freelancers further wasn’t enough we also as yet have had no sight of the tool that the government propose to use to assess these workers. It’s disappointing that we find ourselves again with no idea of what these changes actually mean and how, as a sector, we are supposed to work with them. The outcome of this is sure to be increased uncertainty and as a result of this is, many will leave the public sector, creating a massive skills crisis.“We’re also puzzled that the five per cent tax-free allowance has been abolished as this is supposed to be for the ongoing costs of running a limited company, not just for the initial admin burden of assessing your status.”
“Contractors should be concerned for the future. The government is continuing to squeeze the lifeblood out of this sector. HMRC are tackling the abuses of the few by applying wholesale changes and this only serves to penalise the majority who operate fairly.“This is a lazy approach and the government must do more to understand this sector and the modern way of working so they can look at future policy and make sure Britain creates an environment that allows the temporary workforce to flourish. This will give our businesses and overseas organisations the confidence to invest in the future of the UK.”
Michael Barton, managing director at Rotherham Taylor:
“Few would have put much money on this being the last Autumn Statement, although there had been increasing calls on the Chancellor to make such a move in recent months. This is to be welcomed, however, as it will give businesses of all sizes time to plan ahead with certainty about future tax changes.“The detail of some of the Chancellor’s key announcements remains to be seen, including on the national productivity fund, which will hopefully provide assistance for SMEs. It will also likely take some time before the infrastructure spending announced today will deliver tangible benefits to businesses outside the construction sector.
“However, notwithstanding the surprise announcement that this would be the last Autumn Statement, the Chancellor seems today to have lived up to his reputation as a low-key operator who wants to be seen as a safe pair of hands.”
Noam Handler, head of tax in the North West at EY:“In what was really a mini-budget, with the 43 measures including 18 tax changes, the chancellor ranged across tax system, giving a little bit here and taking a little bit there. The freeze in fuel duty was predominantly funded by the two percentage point increase in the Insurance Premium Tax. Some helpful additional funds will come from aligning the employer and employee rates of National Insurance contributions.
“The chancellor has avoided a car crash, by exempting low emission vehicles from the £235m attack on salary sacrifice, but keeping many other benefits within his targets. He also increased the VAT flat rate scheme, providing another £195m next year, and confirmed the implementation of the off-payroll working rules in the public sector.“All in all, this was an Autumn Statement that felt pretty familiar and similar to those of his predecessors. The chancellor even confirmed that he would stick with the Business Tax Roadmap of the last Budget. This may be of limited benefit since it was more of a travel journal than a roadmap, and was short on vision for the future. Many businesses will be thankful for the lack of new measures but will now be waiting for legislation day on 5 December to see the detail of the items omitted from today’s speech.
“As for the statement itself, we will now see a return to the November Budgets we remember from the time of Ken Clarke, taking us back 20 years. In the future, the chancellor will be able to play Father Christmas rather than the Easter Bunny.”
Martin Hall, head of compliance and risk, at ICS:“The government confirmed in the Autumn Statement today that the proposed IR35 reforms in the public sector have the green light and will be implemented from April 2017. The changes mean that it will be up to those who pay personal service companies to assume responsibility for confirming IR35 status, rather than the PSC themselves.
“As expected, the details were quite general and we will have to wait until 5 December when the draft legislation is set to be released to find out more. We expect to see a version of the proposed online tool in the near future which is intended to assist the engager with making that decision.“Another important development from the Autumn Statement for contractors working in the public sector is that the 5 per cent tax-free allowance will be withdrawn. The government will also be introducing a new 16.5 per centVAT flat rate scheme from 1 April 2017 for businesses with limited costs, such as many labour-only businesses.”
Steve Warren, north west region director at EEF, the manufacturers’ organisation:
“Business was looking for reassurance from the chancellor at a time of considerable uncertainty and he has helped calm nerves with a pre-Brexit tonic pitched at the right level. He is walking a fiscal tightrope, but his pragmatic statement provides enough stimulus in key areas vital to improving productivity while holding back some fiscal firepower if, as the OBR suggests, the economy stutters.“The chancellor has also provided industry with a down payment on a modern industrial strategy. The boost to science and innovation is vital if we are to be at the forefront of the 4th industrial revolution, while the doubling of support for exports should grease the wheels for business in growing markets abroad. The chancellor has also signalled a welcome recognition that our digital network and local roads are not fit for purpose and need major upgrade.
“From now on this should be the direction of travel for future statements and policy decisions, with government using the right levers to address productivity, regional growth and housing. A commitment to keep pushing on these priorities, while addressing past under-investment in infrastructure, will send out the right message to businesses here and overseas that post-Brexit Britain really is open for business.”
Colin Tice, tax partner at Cassons:“The initial reaction was gratitude that the Autumn Statement was to be abolished! Unfortunately this just means that in future the budget will be in the Autumn. The Spring Statement will be a response to the Office for Budget Responsibility forecast. This is more than changing things around, as the government will in future have only one major announcement of tax policy changes rather than two and with more time for consultation until any changes take effect.
“The North West will benefit by investment of £400m into the Northern Powerhouse Investment Fund which, in conjunction with Local Enterprise Partnerships and the British Business Bank, should release £1bn of venture capital funding into local smaller businesses, starting in early 2017.“Overall, government debt must remain of concern as we approach Brexit with continued increases in borrowing forecast for the foreseeable future.”
Jo Ecob, partner at Abrams Ashton:
“After a turbulent year in politics it’s refreshing to see few major business reforms on the cards. Companies need stability, especially when facing Brexit uncertainly and whether the split will be soft or hard. It’s positive that the Government is fine tuning what’s already in place and moving to an Autumn Budget that will help us plan well in advance of any changes and prevent putting the brakes on growth. The additional investment in infrastructure will also help business – particularly those based in the north. We can only hope the general upturn will compensate for the increase in the living wage, which will undoubtedly hit certain sectors.”
Sir Merrick Cockell, LPFA chairman:“It is encouraging that the chancellor has identified infrastructure as a priority and will work with the National Infrastructure Commission on a plan. There is no shortage of funds to invest in UK infrastructure. What is lacking are the appropriate assets and the right deals to invest in. Hopefully an economic infrastructure plan will include how to finance such developments and involve potential asset owners, such as UK pension funds, right from the beginning.”
Jane Parry, managing partner at PM+M:
"The chancellor’s first (and last) Autumn Statement delivered little by way of surprises. The main tax changes were already known about – the planned increase in the personal allowance and income tax higher rate threshold and the reduction in the rate of corporation tax and reform of corporation tax loss and interest relief rules being the key ones."The confirmation that the planned reduction in corporation tax rates to 17 per cent in 2020 (19 per cent next April) is to go ahead is good news. Interestingly, there was no mention of the “15 per cent and beyond” spoken of by Theresa May on Monday.
"Only time will tell how the North West will benefit from the £1.1bn extra investment in England’s local transport network; the more than £1bn for digital infrastructure; the £2.3bn to help provide 100,000 new homes in high-demand areas; the £1.4bn to deliver 40,000 extra affordable homes; and the £400m for venture capital funds through the British Business Bank to unlock £1bn in finance for growing firms. However, all are potentially positive announcements for the region."Given the advance publicity about R&D and innovation, it was a little surprising not to see any changes to R&D tax credits. However, this is already a very generous relief. The issue is more with the low take up of the scheme, rather than the nature of the tax reliefs on offer. It is to be hoped that some of the new funding might be directed at improving accessibility of R&D reliefs.
"The announcement of consultation on incorporation, which now seems to be seen as tax avoidance, was a little concerning and could cause uncertainty for many businesses who might be considering incorporation for perfectly legitimate commercial reasons. There were a few targeted tax avoidance announcements, from a government which has already made significant strides in tackling avoidance and levelling the tax playing field. None of them should have widespread impact."
Keith Pressler, senior wealth management consultant, Taylor Patterson:"There was much anticipation expected from Philip Hammond’s first Autumn Statement, however during his speech he indicated that he would look to keep policy changes limited. They are looking for fiscal discipline and investment to drive productivity.
"Even though slower growth is expected the labour numbers are expected to remain steady with an increase in workers over the next few years. The expected budget surplus by 2020 is now no longer going to happen, but will be brought down as soon as ‘practically possible’, expected to be within the next Parliament."Investment will be made available from additional borrowing and this will be used for infrastructure and innovation spending. There will be a £23bn National Productivity Investment fund available for research, development and innovation.
"To end the speech Philip Hammond advised that there would be no further Autumn Statements, this would be replaced by an Autumn Budget and a Spring Statement. This will allow significant announcements to be made only once a year, unless economic conditions dictated otherwise."
Gavin Taylor, technical director, Mayes Accountants:"For a budget, this was incredibly light on tax changes, although a few did appear which are worth considering. It was actually the chancellor’s last statement on moving the budget to the Autumn, which may sound like nothing to many business owners, that is a major help to them.
"There are two reasons for this, first it gives you a chance to plan for any upcoming changes with more than one to two weeks notice, secondly there is actually a chance that the changes may be finalised before they come into force allowing you to ask for and receive better advice."There has always been a gap in the past between rules coming into force and the rules actually being published in their final form. Historically the budget would be in March, the rules effective from April, but the actual tax law not finalised until June or July, three or four months after it came into force. Detail will slowly appear during this time, albeit subject to change until it is finally agreed. I would hope that moving the budget back to the Autumn will allow the government to finalise the changes before, not after, we are supposed to be applying them."
Carolyn Fairbairn, CBI Director-General
“The chancellor has prioritised a pragmatic down payment on future productivity growth. His emphasis on R&D, housing and local infrastructure will help businesses in all corners of the UK to invest with greater confidence for the long-term, during turbulent times. This will be warmly welcomed.“These measures must now be translated into action. That means tarmac, tracks and telecoms being laid, and clear, deliverable timetables for major projects – only then will they act as a catalyst for investment, jobs and growth.
“Reducing the frequency of fiscal events along with the commitment to stick with the tax roadmap will provide stability for businesses. Importantly, the new fiscal rules provide the government with welcome flexibility, while remaining prudent, in uncertain times.“The government is right to accept the independent Low Pay Commission recommendations, as firms want to see affordable rises in the minimum wage that protects the low paid and avoids damaging job prospects. “The chancellor should keep a watching brief on the challenges created by higher inflation and uncertainty weighing on near-term business investment.”