Following the landslide Labour victory at the UK general election (4th July), we hear the latest reactions from the accountancy profession.
ACCA urges new government to prioritise finance and economics in first 100 days
Glenn Collins, Head of Technical and Strategic Engagement, ACCA UK, said: “The incoming Labour government must act swiftly, as the first 100 days in office are crucial for any new administration. ACCA would welcome outline timetables for addressing key issues, such as economic, fiscal and corporate governance reforms. A focus on increasing business confidence through improvements to the HMRC service, encouraging investment (both domestic and international) and supporting small business owners effectively with growth are all things ACCA has raised previously this year.
“The nation is experiencing a large skills gap, with multiple industries needing skilled workers to help boost productivity and business growth. ACCA advocates a review of the apprenticeship levy, as well as including mutual recognition of professional qualifications in future trade deals, as these remain an important method of accessing careers in finance and addressing skills shortages.
“Business confidence and investment have also been challenged for the last few years. ACCA calls on the new government to focus on creating a framework for growth, nurturing a transparent and trustworthy business ecosystem. ACCA advocates for immediate and drastic change at HMRC, with taxpayers and their agents enduring unacceptably low service standards. ACCA calls for action to restore trust between HMRC, taxpayers and agents by implementing a programme of improvements, including additional resource and training for staff.
“ACCA would welcome any clarity from the incoming government on how it will address these concerns within the first three months in office.”
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By GlobalDataCrowe on Labour’s tax policy [12:29, 5th July]
Robert Marchant, Partner and Head of Tax at Crowe UK, comments:
Fiscal drag- what was not said
“The new government has told us that they won’t raise the headline rates of the main taxes, but what was conspicuous by its absence was any comment about unfreezing tax thresholds. The impact of ‘fiscal drag’ has already been significant (whereby tax thresholds are unchanged despite inflation) both on how more people and companies end up paying more tax but also on the administrative complexity that organisations deemed to be ‘large’, by the tax legislation, have to deal with, despite not having large tax or finance teams in place to handle these requirements. Figures from HMRC show that the number of people paying income tax has risen to 4.4m in three years owing to a freeze in tax thresholds. There have been no suggestions from the Labour Party that they will take actions to address this.”
Tax simplicity
“Our new government will be desperate for economic growth but many of the individuals and businesses that will drive this will be devoting a lot of resources to complying with a tax system that remains overly complex and in desperate need of reform. Labour have said that they will not increase the headline rates of the main taxes, which indicates that we can expect further tinkering to reliefs and exemptions in order to increase the tax yield, making it an even greater challenge for individuals and businesses to understand the tax system and to get it right. If you then add on top of this the well-publicised challenges of being able to speak to an HMRC adviser via the telephone and extended timelines for correspondence to be processed, it is not a good time to be a taxpayer.”
Tax avoidance
“It may not have been as headline grabbing but there was a commitment from Labour to raise £5bn of additional tax by reducing tax avoidance and successive governments have talked about reducing tax avoidance but the tax gap in 22/23 had risen to £39.8bn from £38.4bn in 21/22; so the policy is commendable provided that the measures taken do not inadvertently or disproportionately impact the innocent. Our tax law is becoming so complex it is all too easy for individuals and organisations to make innocent mistakes.”
CIPFA responds to election results [10:14, 5th July]
Owen Mapley, Chief Executive of CIPFA said:
“The new government must seize this opportunity to transform the way the public sector works. A mission-driven government can redefine how public services are funded, empowered and supported.
“Greater stability and more predictable planning cycles will encourage innovation and longer term, more transparent decision making. This will strengthen the design and delivery of Britain’s public services and provide a foundation for sustainable economic growth.
“We need greater collaboration between central government and all public service organisations. Working together with local people, voluntary organisations and other partners to deliver a tangible shift to prevention and early intervention. This will help prevent problems from arising and secure better outcomes for citizens and greater value for taxpayer’s money.
“We call for a principled and sustainable approach to devolution, with place-based decision-making at its core. This will bring both delivery and accountability for local services closer to communities. Such devolution and collaboration will also be crucial in pursuing ambitious targets for sustainable growth and Net Zero.
“We particularly welcome the new government’s commitment to attaining the highest standards in public life. As custodians of standards in public finance, CIPFA is well placed to help achieve this goal. We will work with the Government to reform governance and audit, champion professionalism and renew people’s trust and confidence in public service.
“CIPFA see the government’s first Spending Review as an important opportunity to start enabling these changes. The Spending Review must herald the end of short-termism and ad hoc instability. We encourage the government to embrace new and more sustainable approaches to planning and resourcing public services which have been severely depleted. It is an opportunity to give hope to those facing demands that far outstrip their constrained resources leading to growing waiting lists, public dissatisfaction and growing budget deficits. New approaches to capital funding can support the renewal of dilapidated public service infrastructure and allow investment in the latest technologies to improve service performance.
“We hope and expect the new government to improve outcomes for service users, support our great public servants, and secure value for money for taxpayers. As the experts in public financial management, CIPFA and its members are ready to provide advice, support and partnership to pursue these important ambitions.”
IRIS: Many hoping for recommitment to MTD [08:31, 5th July]
IRIS Software Group CFO Michael Cox said: “Accountants and the wider business community will be anticipating the new government provides certainty and continuity on the digitisation schemes for HMRC.
“Many will hope this includes a recommitment to Making Tax Digital, which is playing an essential role in modernising HMRC to avoid inaccuracies that arise from traditional collection methods – and help thousands of businesses across the UK to digitise their practices.
“If there are going to be any changes in direction, it is a must that they are well-planned and communicated effectively with accountants and software developers to ensure businesses have the time to understand, adjust and adapt.
“Elsewhere, the promise of new audit reforms presents an opportunity to boost transparency and improve quality through increased scrutiny and regulatory changes, impacting accountants’ roles and responsibilities, however any costs relating to this are likely to be passed on to businesses and they will need to quickly understand the implications.
“Labour’s commitment to enhancing R&D tax credits aims to foster innovation by reducing taxable profits for companies investing in research. This initiative is designed to boost technological advancement and enhance the UK’s global competitiveness, representing a welcome change.
“Additionally, the retention of a permanent full expensing system for small business investments ensures the immediate deduction of eligible capital expenditures. This approach eases financial burdens and improves cash flow for small businesses, contributing to their growth and sustainability.
“SMEs should seize these incentives to drive innovation, enhance productivity and foster growth whilst promoting entrepreneurship, creating jobs and ensuring long-term economic prosperity. “While detail on new policy is still light, we expect that accountants and businesses will face heightened expectations in a more stringent regulatory environment under the new government.”
HURST urges Rachel Reeves to take time for reflection tax [07:55, 5th July]
Adrian Young, a tax partner at independent accounting and business advisory firm HURST, said: “Now that the long-predicted Labour win has come to pass, focus in the north west business community is turning to what it all means in practice.
“Tax was front and centre of the election build-up, and it formed a key plank of the Tories’ attack on Labour. Labour for their part held up a mirror to Tory accusations by reminding us that taxes are at a 70-year high after 14 years of Conservative government.
“But now that we know who will be calling the shots, we can start to look more closely at how new Chancellor Rachel Reeves will approach the job, and what this will mean for taxpayers.
“Having spoken at length to local business leaders, it is clear that stability is the most valued attribute Reeves can bring. The economy has faced fiscal turmoil over the last few years, not least with rising tax burdens and Liz Truss’s ill-fated but short-lived experiment. As a result, the businesses I speak to crave predictability above all else.
“I would therefore like to see a period of reflection before any material calls are made by the incoming government with regard to tax.
“As it is, the staging of the election in early summer gives Reeves precisely this time to reflect. In addition, given that the Office for Budget Responsibility (OBR) needs a minimum of 10 weeks’ notice to prepare meaningful feedback for a fiscal event, this appears to push things into perhaps September.
“Given that the Labour manifesto commits the party to obtaining OBR support for budgetary announcements, it does seem that early autumn is a more likely time for major policy changes.
“That said, there is nothing to prevent Reeves from providing a steer in the interim. So, what can we expect?
“Some headlines have already been heavily trailed. We can therefore expect minimal short-term changes to income tax and national insurance, the key tax raisers. Labour have also promised not to increase VAT rates, although we do know that they are planning specific measures such as subjecting private school fees to VAT. Whereas this is without doubt a minority sport, it has grabbed headlines.
“Overall, the key election pledge from Labour was to not raise taxes for ‘working people’.
“This was deliberately vague and gives plenty of room for manoeuvre, should Reeves require it. In addition, whether the new Chancellor takes other tax-raising measures, in areas such as corporation tax or capital gains tax, remains to be seen. These would potentially be easy targets politically, given the focused promise to working people rather than employers or businesses.
“In summary then, I think we can expect to see Labour’s tax plans gradually coalesce over the summer months in the build-up to an early autumn budget which will set the tone as the incoming government starts to find its feet. It remains to be seen whether Reeves delivers on her promises of a lighter-touch growth platform or whether, as Rishi Sunak the outgoing prime minister repeated, Labour reverts to type with a tax-and-spend agenda.”
