A summary of the key announcements in last week’s Spring Statement.
The Chancellor presented his first Spring Statement to Parliament on 13 March 2018. It gave:
an update on the overall health of the economy and the Office for Budget Responsibility (OBR) forecasts
an update on progress made since the Autumn Budget 2017
invited people and businesses to give views on changes the government is considering.
Major tax or spending changes will now be made once a year at the Budget in the autumn.
An ambitious plan to tackle the UK’s housing challenge and build the homes the country needs
An investment programme of at least £44bn over the next five years was announced at Autumn Budget 2017, aiming to raise the supply of homes to 300,000 a year on average by the mid-2020s.
The Spring Statement announced the following progress:
the government is working with 44 areas on their bids into the £4.1bn Housing Infrastructure Fund to help build the homes that the country needs
the Housing Growth Partnership, which provides financial support for small housebuilders, will be more than doubled to £220m
London will receive £1.67bn to start building a further 27,000 affordable homes by the end of 2021-22
To help people get onto the housing ladder, stamp duty for first-time buyers of homes under £300,000 was abolished at Autumn Budget 2017, with buyers of properties up to £500,000 benefiting from the change. An estimated 60,000 first-time buyers have benefited so far.
Helping households with the cost of living
In April 2018 the National Living Wage will rise to £7.83, worth £600 extra a year for a full-time worker. National Minimum Wage rates for under 25s and apprentices will also rise – the largest increase in youth rates in 10 years. Over 2m people are expected to benefit from April’s increases.
The tax-free personal allowance – the amount you earn before you start paying income tax – will rise to £11,850 from April 2018. This means that in 2018-19, a typical taxpayer will pay £1,075 less income tax than in 2010-11.
Business rates revaluations
At Autumn Budget 2017 it was announced that business rates revaluations will take place every three years, rather than every five years, following the next revaluation. This means bills will more accurately reflect the current rental value of properties.
The Spring Statement 2018 announces that the next revaluation, currently due in 2022, will be brought forward to 2021. This will mean businesses can benefit from the change to three-year revaluations earlier, with the first taking place in 2024.
Reducing single-use plastic waste through the tax system
Disposable plastics like coffee cups, plastic cutlery and foam trays damage the environment. The government is determined to take further action, and is seeking views on how best to use the tax system to encourage the responsible use of plastic.
Some of the money raised from any tax changes will be used to encourage the creation of new, greener products and services. In addition, £20m from existing budgets will be given to businesses and universities to research ways to reduce the impact of plastics on the environment.
Making sure multinational digital businesses pay a fair share of tax
Digital businesses create value in a unique way, relying on the participation and engagement of their users. This is not always reflected in where such multinational businesses pay tax on their profits.
The government has updated its position paper on how the tax system can change to give a fair result for digital businesses. It is also currently analysing the feedback received on its original paper.
Cash in the new economy
The Chancellor announced that the government is seeking views on what more it can do to:
support people and businesses who use digital payments
ensure that those who need to are able to pay with cash
prevent the use of cash to evade tax and launder money.
The consultation closes on 5 June 2018 and is available here.
Taxation of self funded work-related training
The Spring Statement confirmed the government announcement originally made in the Autumn Budget 2017 that it would consult on how it could extend the existing tax relief available for self-funded work-related training by employees and the self-employed. In particular, the government is interested in how any changes could focus on supporting those needing to upskill and retrain, particularly for those who want or need to change career. The full consultation is available here and closes on 5 June 2018.
Alternative methods of VAT collection – split payment
The Chancellor spoke about the need to consult on a new VAT collection mechanism for online sales.to ensure that the VAT consumers pay actually reaches the Treasury.
A consultation (closing 29 June 2018) was released on an alternative method of VAT collection. This will utilise payments industry technology to collect VAT on online sales and transfer it directly to HMRC. The aim would be to significantly reduce the challenge of enforcing online seller compliance and offer a simplification for businesses.
Other consultations published 13 March 2018
VAT registration threshold – call for evidence
The current design of the VAT registration threshold may be dis-incentivising small businesses from growing their business and improving their productivity. This was noted by the Office of Tax Simplification in their review of VAT published last year, who recommended that the government examine the current approach to the VAT threshold.
This call for evidence (closing 5 June 2018) will explore the effect of the current threshold on small businesses, and will then go on to consider different policy options, and ask questions on whether those options could better incentivise growth.
As part of the Patient Capital Review reforms to promote high-growth and innovative investment the government is consulting on the introduction of a new approved fund structure within the Enterprise Investment Scheme, with the possibility of additional incentives to attract investment.
Such a fund structure would be focused on mainly investing in knowledge-intensive companies. This consultation outlines and seeks views on possible elements and constraints of such a fund structure, while also seeking to better understand the capital requirements of innovative knowledge-intensive companies. The consultation is available here and closes on 11 May 2018.
Entrepreneurs’ relief consultation
A consultation was released on 13 March 2018 (originally announced at the Autumn Budget 2017). The government will introduce legislation in Finance Bill 2018-19 to allow individuals who no longer hold a 5% interest in a company to claim Entrepreneurs’ Relief, where the reduction in their percentage shareholding is due to that company issuing shares to raise capital for the purposes of its trade. This is designed to ensure that entrepreneurs are not discouraged from seeking external finance for their companies. The full consultation is available here and closes on 15 May 2018.
Tax compliance for online platform users
The government released a consultation (closing 8 June 2018) which will explore how online platforms could work with HMRC and taxpayers to help people who make money through the platforms to understand and meet their tax obligations.
This call for evidence aims to help government learn more about this area, including about the relationships between platforms and their users and the steps some platforms are already taking to help their users understand and meet tax obligations. It also outlines some measures taken by overseas tax authorities and seeks evidence on the impact of those.
A full list of tax policy consultations and their status can be found here.
The Office for Budget Responsibility economic and fiscal outlook report (March 2018) can be found here.