2020 will be remembered for a number of reasons……. the new decade, a new Government, a clear Brexit position (ok maybe not the last one!)
Then in March, the world changed.
Everyone has been impacted and everyone will continue to be impacted.
The NHS has been a focal point over the past few months, and I’d hope that the Government spending in this area will be protected or grow over the next few years.
The key question is how can this be achieved against a backdrop of the overall public finance cost of Covid-19 in the UK currently estimated to be around £300bn. Latest reports show that the UK borrowed £128bn in the quarter to June. The deficit of tax receipts over public spending between April and June was £174bn, compared to £20.3bn for the same period in 2019/20. The latest Bank of England forecasts indicate that the UK economy will shrink by 9.5% this year and there is currently wide debate on the type of recovery the UK will have. On top of this, as we move to the end of the Transition period, it is also widely noted that any recovery will depend on the virus and the avoidance of a disruptive Brexit.
I think it is clear that we find ourselves at a point where the UK Government has limited choice but to increase the tax take from both individuals and businesses in the UK.
There is a wide range of Government reviews taking place including in relation to capital gains tax and the possibility of a wealth tax being introduced with the expectation that some significant tax reforms are likely to take place. A number of potential changes have already been muted, including;
- Higher rates of CGT and changes to allowances, exemptions, reliefs and treatment of losses
- Speculation that CGT rates will increase to bring them into line with income tax
- Speculation of wide-ranging changes to the IHT regime, including changes to various reliefs, such as Business Property Relief, Agricultural Property Relief and the removal of the step up of the value of assets at the time of death.
- The introduction of some form of Wealth tax.
- Speculation that there may be possible changes in the field of VAT/duties, for example will zero rating on construction survive?
The next 6 – 12 months are anticipated as being taxing times for individuals and their businesses as they continue to try and plan their tax affairs in the most efficient manner. The Autumn Statement is likely to take place in October of this year and the Chancellor is widely expected to start the process of raising taxes to fund the pandemic. Our expectations are that some changes may be immediate.
With just over 100 days until the end of the transition period and the UK’s exit from the Single Market and the EU Customs Union, our forthcoming webinar will focus on the Brexit Tax transition and will cover some of the significant changes that will influence the customs duty and domestic VAT trading landscapes and obligations on supplies of goods and services. We will also highlight the adaptations you may need to incorporate within your existing supply chains.
To register for this webinar, please click here.
At Azets we recognise the importance of planning, to ensure that individuals and businesses are fully briefed on the key changes and how these may impact on the wealth of your family and your business. In our experience, our clients also like certainty of the tax that they will be paying and we are confident that our national tax experts, who are based locally will be able to support you in these taxing times ahead of us.
Aileen Scott is a Partner and Head of Tax, Scotland at Azets, international accounting, tax, audit, advisory and business services group.