The Chancellor has delivered a politically clever Autumn Statement but while there are better than expected deficit figures and the UK on course for a surplus in 2018/19, the public finances still need work. While the national focus may be changes to stamp duty, we think that the Government’s proposed 25% diverted profit tax on MNCs and limiting the losses the banks can offset against tax to 50% are particularly surprising. The focus on balanced growth across the country is refreshing.
The Autumn Statement contains measures on business rates and access to finance which will be of particular interest to small and medium sized businesses. Measures to tackle late payment whilst not in the statement are included in the Small Business Enterprise and Employment Bill and detailed in a new government consultation paper.
The Office of Budget Responsibility (OBR) updated economic forecast today is much closer to ICAEW’s own forecast - that the UK economy will grow by 3.2% this year. It has said that the UK economy will grow by 3% in 2014, but with growth slowing in 2015. Our forecast is that the UK economy will grow by 2.6% next year compared to the OBR forecast of 2.4%. This means that the UK will leave 2014 as it started, as the fastest growing western economy.
The Autumn statement is all about tax and this one was no exception, with a raft of new initiatives announced, some of which were expected and others that were not. Key areas for announcements were changes to stamp duty, business taxes including a review of business rates, a range of new measures to combat tax avoidance including a new tax on diverted profits and a proposal to devolve corporation tax in Northern Ireland.
After the announcement in the Budget 2104 about the changes to the pensions rules, the personal finance changes this time around were more muted but nevertheless significant. Perhaps the most eye catching announcement was the wholesale reform of stamp duty away from a slab tax to a marginal rate tax.