Theresa May has called a general election for 8 June 2017, amid polls that indicate that she could win a huge Tory majority in Parliament. In an election intended to establish stability during the Brexit process, many taxpayers have expressed concern at the prospect of further uncertainty. James Hender, partner and Head of the Private Wealth Group at Saffery Champness, offers his reaction and analysis.
James Hender commented:
“While Theresa May dressed up her reasoning for a June general election with words like certainty and stability, some taxpayers will be wincing at the prospect of yet more uncertainty. With a fully-fledged election on the near horizon it is highly unlikely that all the provisions of Finance Bill 2017 will be legislated for before the Westminster shake up. This means that we are likely to see only the uncontroversial provisions, such as that enabling the government to collect income tax, brought into law, while other elements will either pass though quickly with the agreement of the Opposition or be left by the wayside waiting for a second Finance Bill after the election.
“Any significant delays come with the risk of further alterations – not least if we have a new government with a vastly different view of and approach to taxation. For example, non-domiciled individuals were at long last beginning to see light at the end of what has been a long drawn out and complex tunnel as their tax status was scrutinised and amended. Now, with a conclusion in sight and affairs begun to be set in order, we have further uncertainty about the final shape of the rules and when they will actually bite.”
The election battlegrounds
“Of course, while all parties will campaign on the full gamut of national issues, everything from the NHS to education, it is difficult to see this being billed as anything but the Brexit election. Much of domestic tax policy is unlikely to be directly affected by the negotiations with Europe, but we can expect to see manifestos setting out the stall for what the wider tax agenda might look like given both the opportunities and challenges Brexit presents.
“Indeed, John McDonnell has already hinted at increased taxes envisaged by Labour should Jeremy Corbyn overcome his current polling. By revealing that Labour could impose a maximum salary ratio and hit ‘rich’ people paid over £70,000, the Shadow Chancellor is setting the agenda early to ensure that there is a clear distinction between the two largest parties on tax issues.”
Tax reliefs to boost investment and output
“The creative industries, such as film and TV, may provide an example of how tax reliefs can boost investment and output, and proposals to roll-out similar stimulus to key industries is possible, as are expanded R&D credits. We have already seen the government move in this direction with the Spring Budget move to tackle the administrative complexity of the R&D tax credit scheme. While current EU state aid rules may mean substantial, sector-based changes can’t happen immediately, we could see pledges to expand the credit system - enticing and cajoling investors wary of Brexit’s impact - once the European divorce is settled.”