The UK post-election tax landscape
The recent UK general election has resulted in a minority Conservative Government, and uncertainty about what this means for future tax and economic policy.
The UK Conservative Party’s ‘confidence and supply’ agreement with the Democratic Unionist Party (DUP) will allow the Government to win key votes – including on Budgets and Finance Bills – but this does not necessarily mean it will be able to push forward its pre-election fiscal agenda. Instead, the UK is likely to see both changes in policy and, where previously announced measures are taken forward, some delays in implementation.
A balancing act
There are already signs that the new minority Government will have to soften its stance on austerity, and a number of manifesto pledges, including proposed changes to funding social care, have already been dropped. This is likely to put increased pressure on government finances; one response to this could be an increase in taxation. The Government, which is likely to want to protect its reputation both for fiscal responsibility and for maintaining a low-tax environment for individuals and businesses, will face a delicate balancing act. Tax changes may well take the form of revenue-raising tweaks, rather than changes to headline tax rates.
In terms of the practicalities of tax law-making, a host of measures were dropped from the Finance Bill (now Finance Act 2017) as it was pushed through Parliament ahead of the election. These included significant changes for companies – in the form of both a corporate interest restriction and significant changes to loss relief – as well as changes to the domicile rules for individuals, all scheduled to take effect from April 2017 and the legislation underpinning the Government’s Making Tax Digital programme, due to come in from April 2018.
Ministers indicated at the time of the election that if a Conservative Government was re-elected, a further Finance Bill would be introduced early in the new Parliament to legislate for these dropped measures. Such a Summer Bill has been promised, but not yet published. It is unclear whether, once it is, it will include all the dropped measures or just a selection. Even where legislation is included in the Summer Bill, there could now be a delay in implementing measures, including those that had been due to take effect from April 2017.
Anyone contemplating transactions that might be affected by proposed, but not yet enacted, changes should take advice on the consequences of any such delay.
For more information, contact:
Saffery Champness, UK
T: +44 (0)20 7841 4016