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ICAEW detailed response to Autumn Budget

Wednesday 22 November 2017, ICAEW responds to individual measures announced in today’s Autumn Budget:

Public Sector Deficit figures

Ross Campbell, ICAEW Director of Public Finance, said: “The Chancellor has further loosened fiscal policy. Efforts to reduce the annual deficit have been relaxed over previous promises which means debt will continue to grow.  This means, despite recent improvements to monthly public sector figures, the net national debt stands at £130,000 per household – and will likely reach £2 trillion in the life of this parliament. Interest rate rises are an additional worry and we are yet to see a convincing strategy to get the public finances back in balance by 2025.

Additional £3bn for Brexit

Frank Haskew, ICAEW Head of Tax, commented: “In evidence to the Public Accounts Committee (PAC), HMRC itself said it needs at least an extra £500m to deal with exiting the EU and that is just one department. The scale of the challenge should not be underestimated and this extra funding, given the £700m that has already been put aside, is in addition to the EU Brexit charge that will need to be paid.”

Business rates increase in line with CPI

Clive Lewis, ICAEW Head of Enterprise, commented: “It is disappointing to see a lack of substantial announcements that will encourage investment for small businesses. While changing the rate for business rates is a small measure, it is still a step in the right direction. It should not be forgotten the number of additional costs businesses, especially SMEs, are facing at this time. Increasing input prices, rising interest rates and additional regulatory burdens are all impacting on UK plc at a critical time.”

Further anti-avoidance tax measures

Frank Haskew, Head of ICAEW Tax Faculty, said: “The public is rightly concerned about tax avoidance, and we support efforts to tackle it.  ICAEW already has the Professional Conduct in Relation to Tax (PCRT) and we have been working with Government and HMRC to ensure that our code continues to be fit for purpose and retains confidence. The Government needs to ensure any sanctions are properly targeted at those advisors that promote aggressive tax schemes and do not focus on reputable professional advisers who advise on legitimate tax planning. Individuals and companies who take advantage of any country’s public services have a responsibility to pay tax in those countries that fund those services.”

Review of VAT threshold from £85,000

Matthew Rideout, ICAEW Director of Business, commented: “Although the Chancellor announced a further review of the VAT threshold, he needs to remember ongoing challenges faced by small businesses. Additional regulatory burdens such as Brexit, Making Tax Digital (MTD) and the Apprenticeship Levy are all imminent  and SMEs cannot cope with further changes, liability and inconvenience.  VAT was originally introduced in 1973 as a ‘simple tax’. Since then it has become vastly more complicated to administer and is a significant obligation that falls disproportionately on smaller businesses. It should be retained at its current level or consideration be given to increasing it further, perhaps with measures to ease businesses into VAT to avoid the ‘cliff edge’ effect.”

Increasing investment in innovative firms

David Petrie, ICAEW Head of Corporate Finance, said: “Some of these measures should make a difference, if done well. Others, most notably an improvement in the rate of R&D tax credit and the approval process are welcome adjustments to things which are working well already.

“Setting up a £2.5bn “Patient Capital” fund as well as the £500m Pioneer Fund targeted at new technologies such as AI, 5G and new broadband, are the right ideas. The challenge for the British Business Bank will be making sure that the combination of taxpayers’ money and private capital in the funds finds its way into businesses that really need it. However investors are going to require a  commercial return on their money –delivering that mix of investing in new and potentially unproven technologies and also providing a commercial return will be very tricky.”

Further information can be found at www.icaew.com/budget

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Caroline Florence - ICAEW press office
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Email: Caroline.florence@icaew.com