Chancellor of the Exchequer, Philip Hammond, will address the House of Commons on Tuesday, 13th March in what the UK Government is calling the inaugural Spring Statement. It is the first lower-profile fiscal event since the Government opted to switch to one major fiscal event per year from 2018.
Although it is not a fully-fledged Budget, Mr Hammond will provide MPs with an update on the country’s economic health. The update could still have significant consequences for small businesses across the country. Below are some of the most likely topics to feature in the Chancellor’s inaugural Spring Statement.
Economic forecasts from the Office for Budget Responsibility (OBR)
Mr Hammond will primarily use his Spring Statement to disclose the independent OBR’s updated economic forecasts. At the time of last year’s Autumn Budget, the OBR downgraded prospects for productivity growth and warned that the national deficit could rise in the current financial year.
However, reports suggest that strong growth in the UK’s service sector could see the OBR revise up its predictions for the remainder of 2018, delivering a £15bn windfall to the Treasury.
The Chancellor is expected to announce a significant boost to the Treasury coffers to the tune of £10bn, following record tax receipts in January. Self-assessment receipts helped generate the second-best month on record for UK tax revenues.
Alongside the Government’s fiscal updates, Mr Hammond is likely to confirm a series of public consultations ahead of possible reforms in the Autumn Budget 2018. Probable areas for further investigation include the taxation of the UK’s digital economy, artificial intelligence (AI) and automation.
The Chancellor is also expected to firm up a consultation on extending IR35 reforms into the private sector.
Clarity on company car taxation
Although Mr Hammond won’t be announcing immediate tax changes or spending announcements, the UK’s fleet industry is calling on the Chancellor to provide clarification on the Government’s future direction on vehicle taxation, including company cars.
John Pryor, Chairman, ACFO, said: “It is unfair to expect company car drivers to enter into three or four-year agreements without knowing how they will be taxed in future.”
Potential response to IPPR report
A recent report by the Institute for Public Policy Research (IPPR) has called for a radical overhaul of the UK tax system. The research suggests scrapping income tax thresholds and merging income tax with National Insurance. The IPPR claims that this, along with an introduction of rates tailored to an individual’s income, would generate the same amount of income as it does now.
Lord Willetts, Conservative peer and chair of the Resolution Foundation, said in a speech this month that reform was needed to avoid placing undue burden on the next generation. It’s possible that the Chancellor could acknowledge this report in his Spring Statement and agree to further consultation.
Tax clampdown on tech giants
Finally, UK small businesses will be relieved to hear that the Government is fundamentally changing the way the world’s largest tech firms are taxed in Britain.
A new tax on revenues rather than profits is likely, ensuring large digital organisations pay a “fair” amount of tax, according to the Financial Secretary to the Treasury, Mel Stride.
If you’d like to stay up-to-date with the outcome of next week’s Spring Statement 2018, visit our Twitter feed @TaxAssistUK and our Spring Statement Summary or register here to receive our free newsletter on the day.