The King's Speech on 17 July didn't contain any announcements with an immediately obvious and direct tax focus, however there are clues as to what we might expect within this Parliament on the tax front.
A read of the Labour party manifesto, analysis of what the previous Government had already put in place, and an ear on the rumours mean that we can start to think about how to help our clients prepare for possible changes.
Whether this assessment might be impacted by the inevitable day 1 shock at what's really going on under the cover remains to be seen.
Possible tax issues to think about at this early stage are summarised below:
Business Taxes
The Labour manifesto commits to maintaining the rate of Corporation Tax for the duration of the Parliament. There doesn't appear to be any appetite for, nor suggestion of, changes to the Capital Allowances rules. The Labour manifesto pledged to maintain the Annual Investment Allowance at £1M, and promised more investment certainty for businesses through the publication of a business tax "road map". So what might that include?
We can certainly count on environmentally focussed tax levers, such as through changes to R&D and other investment incentives. Decisions on the continuation or otherwise of the Oil and Gas, and Electricity Levies will need to be made; the manifesto pledges the Oil and Gas Levy will be increased and extended.
Business rates are set to be reformed, in light of the growth of online retail giants.
Employment Taxes
Employers will welcome any changes which reduce the complexity of the tax system, and their administrative burden. Pre-election, Labour pledged one flat rate of National Minimum Wage regardless of the employee's age, and that they would replace the Apprenticeship Levy. However there are no suggestions of changes to employee or employer tax rates, nor of the requirement to auto enrol employees in a pension scheme.
Pensions
The King announced a new Pensions Scheme Bill which will, significantly, allow consolidation of an individual's pension pots. No news on changes to the tax reliefs available on contributions during a saver's lifetime, nor on the IHT implications of passing on a pot after death, however indications are that both may be within the new Chancellor's sights. Savers may wish to consider making the most of the current reliefs available on contributions, on the assumption that reforms are likely to be less generous, with rumours of a flat rate or cap for higher earners.
Personal Taxes
It seems rates and bands on personal tax and National Insurance Contributions are set to remain as they are for the foreseeable future. Capital Gains Tax, ripe for reform in several respects, may be within the Government's sights if they need to increase the tax take. For example, the Chancellor has not ruled out imposing CGT to a greater or lesser extent on the disposal of a primary residence. Private Equity carried interest is treated as a capital gain and it is widely understood that the Government would like to tax this in certain circumstances as income.
The previous Government announced their intention to shake up the UK's tax regime for non-UK domiciled individuals. This is a key focus: Labour are likely to want to do the same, but we should expect some changes. For example, Labour previously announced intentions to abolish the 'non-dom loophole' without any specific details, but it's likely they will look at the proposed transitional arrangements concerning remittances.
Inheritance Tax
Rumours of changes to the IHT regime in recent years have ranged from complete abolition, retention with higher rates, to replacement with something completely different. However, this contentious area remained untouched by the King's Speech. This only intensifies the feeling that the Government need to consider how they wish to use this tax in greater depth. Possible targets may include reform of the significant reliefs – Business and Agricultural, and reliance on their continued availability in the coming years would not be wise.
Stamp Duty Land Tax
The previous Government tinkered a lot with this tax, as it is a key lever impacting the housing market. The only announcement from Labour pre-election was an intention to increase the surcharge on non-UK nationals buying UK residential property by 1%, to 3%. We might expect changes, possibly to sweeten the deal should the Government decide to impose a Capital Gains Tax charge on disposing of a private residence.
Tax avoidance
The new Government have been vocal in their desire to improve tax compliance and reduce avoidance in particular. They will undoubtedly make efforts to invest carefully in HMRC, modernising and streamlining through better use of efficient technology and building capacity, and will be keen to signal a changing of the guard that allowed busy helplines to be closed. We should expect to see wider powers and tax reporting requirements.
So, where does this leave us? Clients may be cautious about the road ahead: with little detail at this stage, we can only be sure that heads within government are working hard on making changes. The key message at this stage is to make use of all reliefs while they're still available and consider bringing forward planned transactions if you are relying on particular exemptions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.