Grant Thornton's Jonathan Riley considers the Autumn 2017 Budget and whether or not it will deliver a vibrant economy.
The Chancellor resolved at the outset of his speech that today’s budget would be one that looked forwards to a future full of change, new challenges and opportunities. A recognition of the need to invest now to grow our economy for tomorrow. A positive start then but did it really deliver what the UK needs to create a vibrant economy fit for the future?
Mr Hammond revealed plans to spend nearly £25 billion on a range of measures in an effort to address some of the key challenges facing the UK economy. Most notably increasing the supply of housing and establishing the UK as a world leader in new technologies and innovation.
Housing took centre stage with a range of announcements aimed at increasing supply to help people achieve the dream of owning their own home. Tax measures include the introduction of SDLT relief for first-time buyers purchasing property costing up to £500,000 – worth up to £5,000 and effective immediately – with a fiscal impact over this parliament of £3.1 billion. The Government’s aim is to reduce the upfront costs for first-time buyers. We will have to wait and see whether that will be the case or whether it will lead to higher house prices as it has done in the past.
Support for innovation was another key focus with two key tax announcements.
Firstly, the Research and Development Expenditure Credit, mainly available to large companies, increases to 12% from 11% for qualifying expenditure incurred on or after 1 January 2018.
Secondly, in a drive to encourage more investment in knowledge-intensive companies, with enhanced reliefs available under the EIS and VCT schemes. The limit on the amount an individual may invest under the Enterprise Investment Scheme in a tax year will double to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies. The annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs will increase to £10 million from the current limit of £5 million. The lifetime limit will remain at £20 million.
In other developments, the Chancellor will bring non-resident property owners into the scope of UK tax. This brings the UK into line with common international practice. There are also proposed changes aimed at modernising our tax system to cope with multinational digital businesses with little or no physical presence in the UK but with a large UK customer base.
Finally, as ever there were some targeted anti-avoidance measures and the announcement of a number of consultations. Examples include a review of the intangible fixed asset regime for companies and the taxation of trusts.
Overall, we welcome any measures to encourage building a vibrant economy in the UK. The Chancellor has made a start on this road but we hope for even bolder measures in the future.