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It’s time for businesses to decide how to handle the impact of upcoming tax changes

Posted: 04/04/17 by triad

These were the words of advice from experts of the international accountancy and advisory firm, Mazars at their recent Annual Tax and Economic Update Seminar.

The Spring Budget announcement has prompted many discussions across the nation but Lindsay Pentelow, Tax Partner at Mazars Milton Keynes, believes this year’s budget can be broken down into two key trends:

1.) Positive incentives for short term holding of business interests and disincentives for long term holding and;

2.) A tax squeeze on UK based business and individuals

Lindsay said: “Under the first trend we can see that tax on dividends and earnings has increased and there are continued restrictions on the ability to fund significant pensions. Furthermore, Tax rules have tightened with the recharacterisation of large capital returns to shareholders as dividends. There is now a disincentive to long term investment, in including human capital, which could lead to even poorer labour productivity as a result.

He continued: “The second trend seems to highlight the fact that the government doesn’t want the UK to look unattractive to inbound investors especially at what is a potentially fragile time for the UK economy in light of all the global changes that have occurred over the past year.”

Lindsay then went on to explain what businesses can do given the impending changes. Advice included accurate and reliable tax filings and that businesses should ensure they stay within what HMRC considers acceptable. Where possible UK businesses and individuals should also position themselves to access reliefs designated principally for inbounds.

Lindsay added: “We as advisors need to try to mitigate these adverse effects on UK business to the fullest possible extent but in short, the solutions that might help one business might not be suitable for another. Each solution will always be bespoke.”

Also speaking at the event was Dr John Glen, director of the Centre for Customised Executive Development at Cranfield University. He shared his thoughts on the Outlook for the UK Economy in light of the Budget and past year’s events.

Detailing how the UK had continued to enjoy a “Goldilocks” economy – neither too hot, nor too cold, John explained how the post-Brexit economy had grown faster than many had expected, with growth still predicted to slow down but continue nonetheless.

He said that worries over uncertainty in the economic outlook had largely been allayed by the actions of the Governor of The Bank of England and by the Chancellor in his Autumn Statement.

He added: “Mark Carney’s swift action to make a statement and cut rates helped to restore some confidence.

“Hammond stepped up to the plate, setting aside excessive austerity for now and engaging in some pump priming and as a result, at present, the signs are still good.”

However, John also went on to caution that a potential perfect storm could be round the corner.

“It is largely consumer confidence that is driving economic growth at present, but we must be mindful that consumer confidence is notoriously fragile. That being said, business confidence is growing but investment is still very low, banks are extremely risk averse and the political risk factor is higher than this time last year.

“Brexit will no doubt heighten uncertainty particularly during a protracted and painful negotiating period with the potential for a bad or no deal occurring. However, I believe that if Marine Le Pen is elected in France then all concerns about Brexit will most likely fade immediately.”

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