Spring Statement: Calls for greener tax policies and clampdown on VAT fraud

Chancellor Philip Hammond announced in 2016 that he wouldn’t “make significant changes twice a year just for the sake of it”, and this light Spring Statement, lasting 26 minutes and largely focusing on forecasts and calls to evidence, has indeed confirmed that the Autumn Budget will be the only major fiscal event of the year. AAT welcomes this as it provides greater certainty for businesses, policymakers and the public as a whole. We hope in time this will go further. The majority of our members have told us they would like to see Government publish a broad tax strategy at the start of each Parliament and stick to it, to help everyone know the general direction of tax policy in the UK, and provide businesses and individuals much greater certainty about the future.

Tax reforms to follow

A call for evidence on the VAT registration threshold, ahead of the UK’s withdrawal from the European Union by March 2019, is hardly surprising given that VAT is a European device. Naturally, VAT is not going to disappear overnight given that it rakes in billions of pounds to the Treasury’s purses each year. The VAT registration threshold has already been frozen at £85,000, which is of great benefit to thousands of small businesses, but more than a third (36%) of AAT members wish to see this threshold ‘substantially increased’, perhaps as high as £500,000, post-Brexit.

VAT was also in the spotlight around online sales, with a consultation launched today around split payment in order to help combat fraud. Utilising technology in terms of collecting the VAT that is owed makes total sense, and is another reminder that Government is determined to ensure the tax system and technology innovations are complementary of each other. This is significant, given we are a little over a year away from the initial launch of Making Tax Digital (MTD), the scheme that will help tax returns enter the digital age – though it was surprising that MTD itself was not mentioned.

The suggestion of using the tax system to address single-use plastic waste should be cautiously welcomed. Of course it is right and proper for such green policies to be enacted, but taxes that change consumer behaviour can have unintended consequences which need to be thought through – with a move towards non-plastic substitutes likely to increase pressure on agricultural land through a move to growing bio-alternatives. Similarly, any new measures dedicated to funding the NHS sound like a good idea in principle, but surely National Insurance should be reviewed first.

Apprenticeships and T levels

While the apprenticeship levy is beginning to bear fruit, with nearly one in two small businesses telling AAT they have already accessed available funds, Government has recognised that greater small business enthusiasm for apprenticeships will help them reach their three million starts target by 2020. The promise of £80 million from the Education Secretary will undoubtedly help with this, and we hope small businesses will be encouraged by this funding opportunity.

This skills initiative supports the fact that all employers are, from April 2018, being given extra incentives to tackle Britain’s productivity problem. This is through a £50 million grant to help employers roll out placements for T levels, which aim to transform technical education in the UK, and mentioned by the Chancellor in today’s speech. High-quality technical qualifications are an excellent tool of improving social mobility and open up career paths to many thousands of young people, and the additional £500 million for T levels in post-16 education, also underlines Government’s commitment to making the scheme work as an even more credible alternative to higher education.

ISA simplification remains on the cards

While there were indeed no major policy announcements made in the Statement, AAT will maintain calls for the Chancellor to consider a radical shake-up of the current ISA regime, given that savings policies remain under constant review. A letter from AAT Chief Executive Mark Farrar to the Chancellor has called for the introduction of an ‘Everything ISA’ dashboard where all ISA products are housed in a single location, with annual limits scrapped in favour of a £1m lifetime contributions allowance. While we await a formal response from Treasury, AAT has enjoyed overwhelmingly positive feedback from the savings industry on this topic, and we hope that tax simplification in this area will ultimately lead to greater understanding from the public, and therefore greater savings levels.