Despite his assertion that this Budget was “preparing Britain for a brighter future” and that his ambition was to make it the best place in the world to do business, there was precious little concrete in his Budget Speech to indicate how he was going to make it happen.
Yes, there were some big headline hitters – such as narrowing the gap between the national insurance that employees and the self-employed pay, changes to business rates and deferring quarterly reporting for businesses under the VAT threshold – but much of the potentially more controversial changes, such as business rates reform, he intends to consult on over the summer. So we will have to wait until the Autumn, when he announces his next Budget.
Room to manoeuvre
In the run-up to this, Hammond’s last Spring Budget, he had warned that despite the fact that the economy was continuing to “confound the commentators”, he was not going to announce a big give-away and would be sticking to plans to reduce the budget deficit. And that is exactly what he did, according to Nick Parker, ICAEW’s deputy president.
“The chancellor did what he needed to do with a Budget that moved the country one step closer to a post-Brexit economy.
“Against a backdrop of better than expected economic performance, he has given himself room to manoeuvre in the future should Brexit have more damaging economic consequences than currently forecast.
“More still needs to be done to encourage business investment, improve productivity and address the state of the public finances – and the Autumn Budget will provide the perfect opportunity to tackle these. With the national debt now at £130,000 per household and the interest bill at £39bn per annum, time is clearly of the essence.”
British Chambers of Commerce director general Adam Marshall agreed. “Businesses had been advised to expect minimal change, rather than a blockbuster Budget and Philip Hammond did not disappoint,” he said.
“While businesspeople appreciate a steady hand on the tiller, the government is sending mixed signals by holding investment largely steady at precisely the time that it is exhorting British businesses to double down…
“More needs to be done in the coming months to improve infrastructure and encourage lagging business investment to ensure the UK is Brexit-ready.”
PwC’s head of tax Kevin Nicholson saw it as a “comfortably treading water Budget”. While he welcomed the focus on long-term planning and consultation, he did feel that Hammond had missed an opportunity to “provide a vision how tax can support the industrial strategy and post Brexit Britain more generally”.
“Nor was there anything to simplify tax. The necessary reforms require considered consultation and now is the time to plant seeds for change.”
PwC colleague and chief economist John Hawksworth had some sympathy for the chancellor. He pointed out that facing many economic and political uncertainties around Brexit and other geopolitical events, as Hammond did, it was “prudent to protect the £26bn headroom he left himself in meeting the new fiscal target he set out in the Autumn Statement”.
“But, given the OBR’s view that the underlying economic position has not changed materially since November, the chancellor was not able to add to this headroom despite his cautious overall Budget judgment.”
"Nothing to see here"
Michelle Quest, head of tax at KPMG in the UK, felt that Hammond’s speech “seemed to have more of a feel of a Spring Statement than a full scale Budget”.
“Philip Hammond demonstrated government was listening to businesses’ wish for stability and calls to simply the tax system as well as reiterating that the UK will continue to be competitive on the international stage. Other than some targeted anti-avoidance changes that were largely previously announced, UK business will be relieved to have the breathing space to deal with current changes taking effect during this year.”
“The ‘nothing to see here’ approach adopted by the chancellor will only fly for so long"
Stephen Martin, the Institute of Directors’ new director general, was less appreciative. “The ‘nothing to see here’ approach adopted by the chancellor will only fly for so long.
Lack of immediate relief for businesses
“Business leaders will applaud the long-term focus on improving technical skills and investment in research and development, but the business community will have hoped for much more support in the immediate term, especially amid such economic and political uncertainty.
“The Business Rates reliefs, while welcome, look distinctly modest at first glance, and there was very little in the Budget to provide incentives for business to invest today when they are already putting projects on hold.
“In the context of a cumulative storm of higher inflation, the coming apprenticeship levy and increases in the minimum wage, it is clear that the coming year will be one in which business is expected to grit its teeth and tough it out.
“The chancellor’s jokes may have been funnier than anybody expected, but it’ll be business leaders’ resilience that’ll be needed to ensure we’re still smiling in November.”
Making Tax Digital delay welcomedOne area which has been widely welcomed by the accountancy profession and the business community at large is the decision to defer implementation of quarterly reporting under the Making Tax Digital project for a year for those companies with a turnover below the VAT threshold of £85,000.
As Bill Dodwell, head of tax policy at Deloitte, pointed out, “We’re pleased that the chancellor has decided to defer implementation for those likely to find the new record-keeping most challenging,
“Starting with those most likely already to digital accounting systems should make it easier to introduce this major change. Allowing businesses to use spreadsheets to keep data, or to act as a ‘bridge’ between bespoke accounting systems and HMRC will be a key part of the transition.”
PwC tax partner Stella Amiss expressed the hope that HMRC would use the time to pilot systems thoroughly before making their use mandatory. And she Added, “For those just outside the £85k threshold for a 12-month deferral from MTD, it is important that HMRC ensures the concerns that have led to the relaxation for the smallest of businesses are not forgotten in making sure implementation is a success.”
Positive step in tackling "unfair" gig economy
Think tank the Resolution Foundation welcomed the decision to tackle the “unfair and expensive tax advantages enjoyed by self-employed workers” by increasing the rate of NICs they pay. “Today’s announcement is a bold and welcome move to ensure the tax system catches up with the modern world of work,” said director Torsten Bell. “There are lots of good reasons for people to be self-employed but unfair and expensive tax advantages shouldn’t be one of them.
“By abolishing Class 2 NICs and staggering the increase in Class 4 NICs, most self-employed workers will actually be better off next year, with higher paid accountants and management consultants taking the biggest hit.”
Further business rates reform needed
However, the chancellor’s minimal intervention in the great business rates debate has not gone down that well. Taxand’s Charles Beer described it as the equivalent of “handing out a sticking plaster when the patient needs surgery”, while EY’s London managing partner Caroline Artis felt that the only London businesses that would be celebrating the Budget today were the pubs and those who were previously exempt.
“Otherwise London businesses were left empty-handed and disappointed, especially those competing against digital competition who once again appeared to have dodged the bullet of a business rates equivalent for online businesses,” she added.