The Chancellor will make his autumn speech on December 5. George Osborne will discuss the state of the economy in line with the latest forecasts from the Office of Budget Responsibility.
It is widely accepted that the Chancellor’s debt targets will be missed, according to the National Institute of Economic and Social Research. Osborne will need bigger spending cuts if he wants to hit those targets. The rumour is that the government will abandon its debt reduction target.
Also while unemployment has recently fallen and Olympic fever provided an initial lift, there is a general consensus that times ahead will still be tough. Youth unemployment is still a major problem and overall growth has been slower than expected from the Budget forecast.
Here’s what I’d like to hear…
1 Corporation tax avoidance
It’s a topic that can’t really be missed off the agenda. We need a clear message that the avoidance of tax by multi-nationals won’t be tolerated. An action we would like to see announced is a move to work with foreign governments through OECD to reduce the ability of multi-nationals to move their profits around the globe to low-tax countries.
2 Reduced rate of VAT
This would stimulate business growth in the SME market. We know that many businesses operate below the current VAT threshold and therefore their expenses have been pushed up by the 20% standard rate, without the ability to pass them on to customers.
3 An increase in the personal allowances above the rate of inflation
This was already pre-announced in the 2012 Budget. It is a commitment and a fundamental part of the 2010 coalition agreement. This will reduce the squeeze on household budgets and be of major benefit for everyone, including entrepreneurs and those starting businesses.
4 The 3p Fuel Duty increase set to be postponed
In an economic climate where UK fuel costs are already one of the highest in Europe, if there was an increase it would only serve as another burden on the economy, with a disproportionate effect on the SME community. Also higher relative fuel costs help to make UK manufacturing less competitive than competitors overseas.
And what the Chancellor won’t mention…
1 The introduction of real time information
Most small businesses will incur costs associated with the implementation of real time information and will feel the full impact of the changes more acutely than larger organisations. While advice is out there, HMRC needs to offer more services and support to help smaller businesses prepare for the changes and avoid hefty penalties.
2 The re-launch of business record checks
These have already caused dismay throughout parts of the SME community. While it is reasonable for HMRC to carry out compliance checks, the reality is that many small businesses feel ‘targeted’, incurring penalties of up to £3,000, which may force many owners into bankruptcy.
3 Capping of reliefs
We do not anticipate that the proposed introduction of legislation to cap unlimited tax reliefs at £50,000 or 25% of income announced in the 2012 Budget (due to be implemented in April 2013) will be postponed. The fact that lost relief for start-ups is likely to still be included in the capping provisions is likely to deter budding entrepreneurs, as they will be left particularly vulnerable.
- Brian Palmer, AAT Tax Policy Adviser, will be providing live commentary via the AAT Twitter feed http://twitter.com/youraat during the Chancellor’s speech at 12.30pm on 5 December. Follow the AAT to join the debate.