Simon Littlejohns, Head of Tax at Birmingham accountants and business advisers Friend Partnership, shares his thoughts on the latest changes to the 2017 Finance Bill.
In an extreme measure the draughtsmen hacked 600-odd pages from the Finance Bill this week. This is to get the Bill though Parliament before the Election chaos breaks loose.
Whilst one’s first reaction might be to jump with joy, having seen detail of the measures which have been dropped, I urge caution as I fear that some of the measures may come straight back on to the statute book once the Election result is known and the existing, or new, Chancellor finalises their economic plans.
What’s been shelved?
The headline grabbing measures which have been shelved, for the time being at least, are:
· Making Tax Digital due to come in from 2018;
· The reduction in the dividend allowance from £5,000 to £2,000 due to apply from April 2018; and
· The reduction in the money purchase annual allowance from £10,000 to £4,000 in theory in place now.
The first casualty is very good news as I have long stated my views that the Making Tax Digital (MTD) initiative was being rushed in. Now we may see further delays which should give more time for the provisions to be properly thought through and tested – I have no doubt that they will come in.
There are some tax practitioners who are ‘up in arms’ over this move having spent time wrestling with the new rules and setting up systems with their clients that might now not be needed as soon as they had expected.
The proposed change to the dividend allowance was always viewed as an underhand move and the abandonment of this measure for now will be welcome news to many investors and director/shareholders alike.
There are other changes that will have limited impact for mainstream taxpayers but will be welcomed by those affected.
Will the Finance Bill amendments be permanent?
I fear that some of the provisions will reappear, perhaps completely unaltered, when the next Budget announcements are made, whether in the Autumn or Spring, and whether by Mr Hammond or somebody new. It could also be the case that there are additional, and unexpected, measures on the back of manifesto pledges.
However, advisers and their clients will need to look carefully at these recent changes as the light in the tunnel may not be the freight train they feared after all.