Spring Statement 2018 – Initial Musings

The Chancellor has presented his first Spring Statement to Parliament.

As expected, the Statement did not include any major tax or spending changes – these will be dealt with in the main Budget in the Autumn.

Instead, the Spring Statement gave a summary of the overall health of the economy together with forecasts by the Office for Budget Responsibility and an update on progress made since Autumn 2017, for example with regard to plans to tackle the UK’s housing challenge.  The Chancellor advised that the economy has grown for five consecutive years and exceeded expectations in 2017.

The Chancellor confirmed that in April 2018, the National Living Wage will increase to £7.83, worth £600 extra per year for a full time worker.  He also confirmed that the tax-free personal allowance will increase to £11,850 in April 2018.

The Spring Statement announced that the next business rates revaluation which was due in 2022 will be brought forward to 2021.

The Chancellor also invited views on some proposed future changes to the tax system.  These include:

• Introducing tax measures to try to reduce single-use plastic waste such as coffee cups and foam trays. It is proposed that part of the money raised by such measures would be used to encourage the creation of new greener products and services.
• Developing ways to address the perceived mis-match between the location of value-creating activities and taxable profit for certain digital business models.  In this regard, the Government has published an updated position paper regarding corporate tax and the digital economy.  The Government favours a new allocation of profit model whereby part of a group’s profit is allocated to countries where the users are based.
• Seeking views with regard to extending the current tax relief to support self employed individuals and employees who fund their own training.
• Seeking views as to the role of cash in the digital economy.
• Consideration of possible solutions to tackle perceived actions by small businesses to ensure that they remain below the VAT threshold.
• The Government will introduce legislation in the Finance Bill 2018-2019 to allow individuals who no longer hold a 5% interest in a company to claim Entrepreneurs’ Relief where the reduction in their percentage shareholding is due to the company issuing further shares to raise capital for the purposes of its trade.  There will be a consultation process focussing on the mechanism which will allow individuals to crystallise their relief.

Overall, the Chancellor was positive about the state of the economy and signalled the easing of austerity.

If you would like to discuss any of the changes announced in the Spring Statement in detail please contact  one of our specialist Tax Team at your local office by calling 0845 880 5678, or email action@wrightvigar.co.uk

Don’t forget to pop back onto our Treasury Updates page tomorrow morning for our easy to read and informative Spring Statement Booklet which is in an easily downloadable format.

Spring Statement 2018