MTD forces parties to flirt with tax policies

Making Tax Digital (MTD) is another measure set to affect contractors which should be put on ice until after the election, rather than hastily rushed through this week in the Finance Bill.

Debating the online system post-June 8th would allow more of the framework behind ‘at least quarterly’ tax reporting to be put in statute, instead of in regulations, says the Charted Institute of Taxation.

But despite MTD’s higher than officially predicted cost, and the prospect of slippage in its timetable (potentially postponing its pilot), it is the existing tax landscape that is on ministers’ lips.

Or not -- as it appeared in televised interviews. In fact, on three occasions now when asked, prime minister Theresa May has declined to rule out scrapping her predecessor’s ‘tax lock.’

Her refusal raises the prospect of national insurance, income tax and VAT no longer being off-limits as levies which can be increased, despite a new “low tax” pledge by the Tory leader.

The pledge came after chancellor Philip Hamond said the party’s 2015 manifesto promise on tax constrained “the ability of the government to manage the economy flexibly,” the Financial Times reported.

Mr Hammond has since firmed up this sign that he wants to hike taxes by implying, somewhat light-heartedly, that there will be a fresh Budget after the election.

Fending off criticism by Ian Blackford, an SNP MP, the chancellor reportedly told him during Treasury questions that “after the election… there will be a Budget in order to give him the answers he is seeking.”

Clues to those answers could become available as early as next month, when the Conservatives -- alongside the other political parties -- are due to publish their manifesto.

But both No 10 and No 11 Downing St are widely understood to agree that the party’s previous manifesto contained too many promises, and so ‘themes’ will largely replace them.  

Trade bodies and lobbyists seem undeterred though. Speaking after the PM’s election announcement, staffing body the ARC said the Tories should commit to an entirely fresh review of employment status.

 “We encourage all parties not only to commit to an overall review of employment status and the rules that apply, but to modernise and simplify the rules with joined-up thinking”, it said.

Speaking on Friday, the Association of Recruitment Consultancies also said that because of the snap election, a formal enquiry into controversial aspects of the Finance Bill is “not now proceeding.”

Whether the enquiry would have probed the off-payroll rules seems likely, but calls for their removal from the bill are being muted against a fresh concern that a delay is risky, if a new government with a different, more draconian approach to taxation is elected.

The Labour Party appears to be moving to distance themselves from such a label, saying that on MTD, for example, they would exempt all businesses with turnover under the VAT threshold, including limited companies. The exemption was tabled last month by the Lords.

The CBI, the employers’ group, said: “With a snap general election now called, businesses will be looking to each political party to set out their plans to support economic stability and prosperity over the next parliament in a way that is fair and sustainable.”

On behalf of company owners, the Institute of Directors signalled that the parties have a challenge on their hands to make promise-weary companies listen, following both the Scottish and EU referendums.

The IoD said: “Businesses are having to get used to being buffeted by the changing winds of politics at the moment, and will just have to endure yet another campaign.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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