Following the general election on 8 June, the resulting hung parliament continues to create uncertainty for a number of key treasury proposals, including the introduction of Making Tax Digital (MTD).
MTD – along with changes to the Money Purchase Annual Allowance and Dividend Tax Allowance – were shelved after they all fell victim to the need to secure the passage of the Finance Bill through Parliament before it was dissolved ahead of the election.
The then Financial Secretary to the Treasury, Jane Ellison, who lost her Battersea seat during the election, said: “There has been no policy change. These provisions will make a significant contribution to the public finances, and the Government will legislate for the remaining provisions at the earliest opportunity, at the start of the new Parliament.”
However, until the Queen’s Speech is confirmed later this month, the future of the curtailed sections of the Finance Bill remain uncertain.
Controversial plans for Making Tax Digital, should it proceed, will see most businesses, landlords and self-employed people having to report to HM Revenue & Customs (HMRC) on a quarterly basis.
Concerns raised include the potential costs to businesses of putting the software in place to comply with the measures and the tight timetable for implementation.
Plans to cut the tax-free dividend allowance also failed to make the cut in the last Parliament. This would have seen the allowance cuts from £5,000 to £2,000 from April 2018.
The reduction in the Money Purchase Annual Allowance from £10,000 to £4,000 announced at the Spring Budget had taken effect on 6 April 2017, but was dropped from the bill.
It would have further restricted the amount of relief on pension contributions, where an individual has flexibly accessed their pension pot.
The Chartered Institute of Taxation (CIOT) says the clauses removed from the Finance Bill saw it shrink from 762 pages to approximately 140.
The organisation’s president, Bill Dodwell, said that ‘if the original bill was the weight of a family sized turkey’, the act which actually gained royal assent in May was ‘more of a turkey-crown-for-one’ portion’.
Other measures dropped from the Bill before it became the Finance Act 2017 include:
- New £1,000 trading and property allowances
Pension advice allowance
- Reforms to the status of non-doms, including reducing the deemed domicile limit by two years to 15 of 20 years
- An increase in income tax exemption for employer-funded pension advice to £500
- The right of people who make disproportionate gains on investment bonds to request for their tax bills to be reassessed on a just and reasonable basis
Despite the uncertainty created by the hung parliament, it is widely anticipated that many of the Finance Bill’s shelved proposals, will be prioritised in the next parliamentary session.
We will keep you updated on developments but, in the meantime, if you require further information on how to ensure both your firm and you clients’ businesses are ready for the planned changes to accounting which will be introduced by MTD, please contact us.