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Simon Groom 23 Nov 2017 03:47pm

Tolley 2017 Autumn Budget analysis

SPONSORED FEATURE: Looking at the headlines before the budget you could be forgiven for thinking that chancellor Philip Hammond was the condemned man, about to present the toughest budget for a generation

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Caption: There were also mentions of income tax applying to royalties paid to low tax jurisdictions
Roll forward to lunchtime and when “box office Phil” stood up to entertain the nation he appeared relaxed – even relishing his time in the spotlight, and certainly enjoying baiting the opposition benches, with the predictably noisy reaction. You certainly wouldn’t have thought his job was at risk; or maybe it was the performance of a man who had nothing to lose.

There were the usual set piece attempts at comedy – the skit with the cough sweets went down well on the government benches, the Top Gear reference worked reasonably well, even if it was signposted and not particularly original. The one that did fall a bit flat was the “three steps” to solving the problem of the “staircase tax” – the old adage of “if you have to explain it…” probably applies.

He seemed less comfortable dealing with a couple of thorny issues – the downgrades to growth from the Office for Budget Responsibility (OBR) and announcing help to smooth the introduction of universal credit were both delivered with his eyes firmly fixed on his notes as if he was thinking “if I don’t look at anyone it will be fine”.

When it came to the deficit and debt he felt he was on stronger ground as the OBR figures supported a story of a reducing debt burden even if, as Paul Johnson of the Institute for Fiscal Studies pointed out, the future headroom for meeting his target has halved since the spring.

One of the first things that we did find out was that whatever the final Brexit “divorce” settlement amounts to the UK has already spent £700m on Brexit preparations and a further £3bn is being set aside to fund future costs.

If there was a theme, it was about looking forward to “embrace the future” - the next and future generations received 11 mentions in all. It was also interesting that in the text of the speech published on gov.uk you’ll see [political content removed] no less than 12 times indicating that he is just as capable as George Osborne in making political capital. He particularly enjoyed making the comment about having his “ear bent by my 13 Scottish Conservative colleagues” – a phrase that’s not been uttered for a very long time.

We had two mentions of the inevitable “northern powerhouse” but in both cases they were accompanied by the more recent “midland’s engine” – just so that no-one felt left out.

As is now the case the actual tax announcements in the speech were thin on the ground and when they did come there was very little detail, not that we expected it. We found out that the personal allowance and basic rate threshold will be raised, despite rumours of them being frozen; the VAT threshold will be frozen, despite rumours of it being reduced based on the Office for Tax Simplification’s recent report (probably the only moment of jeopardy when we were guessing “will he, won’t he”); the fuel duty rise will be cancelled again, - and apparently that has cost the treasury, or saved drivers, £46bn since 2010.

On the anti-avoidance front there were also mentions of income tax applying to royalties paid to low tax jurisdictions where they related to UK sales, and making online marketplaces jointly liable for VAT due from the sellers that operate through them showing, according to Mr Hammond, the government’s commitment to leading the charge in the Organisation for Economic Co-operation and Development to deal with the challenges posed by digitalisation.

Simon Groom is director of tax content transformation at Tolley

For more in-depth analysis, practical guidance and commentary on the Budget, and its impact on you and your clients, download Tolley’s free Autumn Budget reports here
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