Following the UK Spring Budget announcement, ACCA, the leading professional body for finance professionals, has welcomed the Chancellor’s focus on VAT thresholds, but questions have been raised as to whether HMRC’s resources can be effectively bolstered without significant investment.
Personal tax thresholds
ACCA head of technical and strategic engagement, Glenn Collins, said: “The November 2023 cut to National insurance at 2p to the pound was a somewhat surprising move for the Chancellor. Now, we have seen further cuts to National Insurance/income tax, at an additional 2p cut. While tax cuts are welcome relief to the pay packets of many, given that the tax burden in the UK remains so high and is on course to only climb higher, any cuts now will only have a minimal effect on the overall issues of the cost of living crisis and the drop in real-terms wages with the pressures of inflation. ACCA calls on the Chancellor to look at raising the personal allowance threshold, a move which would potentially put far more cash back into the pockets of the people over a 2p tax cut. Raising personal allowance thresholds would also reduce the risk of fiscal drag for the lowest earners, and could encourage more people into work as a result.”
HMRC services
Collins added: “The Chancellor has announced today that he will provide HMRC with the ‘resources it needs’ to ensure fair payment of tax from all throughout the UK. What this announcement entails is yet to be qualified by the Chancellor, however it is worth reiterating that increased funding and resources is needed throughout HMRC so not to further add to the administrative burden and uncertainty faced by compliant taxpayers and small businesses.
“ACCA hopes that our repeated calls for improvements to HMRC services will be heeded by the Chancellor without adding further burden to the many millions of law-abiding tax payers in this country.”
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By GlobalDataCapital allowances
Collins continued: “The move to include full expensing tax relief on leased assets is positive news and comes after numerous industry representations. The relief will be enable businesses to be more efficient by leasing assets to nurture productivity by getting the newest, cleanest and most efficient plant and machinery into the hands of business owners. It is disappointing no timeline is attached and we hope the draft legislation will be published and passed quickly.”
Public services
ACCA head of public sector policy, Alex Metcalfe, said: “ACCA welcomes the Chancellor’s focus on public sector productivity, given the continued squeeze on public sector spending. Effective and efficient public services provide the framework for a thriving UK economy, including the provision of good-quality healthcare and responsive HMRC services. ACCA will be releasing a new report on public sector productivity later this year, as finance professionals working in public services must play a critical role in delivering sustainable gains in productivity.
“Recent global research by ACCA and the International Federation of Accountants shows that a professionalised public finance function increases access to decision-useful information, supporting good value for money in the provision of public services.”
VAT
Collins commented: “Increasing the VAT threshold to £90,000 – the first increase in seven years and something ACCA had called for – is a shot in the arm for many small businesses dealing with increased costs, as well as removing what can sometimes be an artificial barrier to business growth. “We hope this will also improve HMRC’s speed in dealing with VAT registration and deregistration, . Hopefully these freed up resources can ensure businesses also receive quicker VAT repayments they are owed.”
Child benefit
ACCA head of tax and business law, Jason Piper, said: “The increased thresholds for HICBC will go some way to reducing its impact and the number of individuals having to file tax returns. The extended taper band will also temper the impact of the excessive marginal tax rates created by the current withdrawal mechanisms.
“The proposal to shift overall implementation to a household basis is more in line with the underlying policy, but is likely to introduce additional record keeping issues as living arrangements naturally shift over time (and rarely in line with tax years). However, with the requirement for a consultation period it is unlikely that we would see any changes here before the general election.”
Non domicile tax
Piper concluded: “The domicile basis for income and inheritance taxes has long been an area of significant complexity, and reform is welcome.”The abolition of taxation based on domicile and a shift to more easily established residence basis should simplify the administration of these taxes.”As always with such a fundamental reform, the transitional measures will need to be designed carefully, as will mitigation of the inevitable risks of behaviour change in the short term.”
