“Prediction is very difficult, especially about the future”. Like its predecessor, 2017 demonstrated the truth of this observation by a Danish physicist.
Tax is allegedly one of the few certainties in life but surprises still occur. In 2018 we should see some of these, already set in motion, gain traction. The new US Tax package, whisked through Congress in record time, will now start to take effect, though the details still require significant work. HMRC’s Making Tax Digital programme will begin a pilot of API (Application Programme Interfaces) links for VAT return figures, VAT unexpectedly being the first tax to be trialled. This is the shape of things to come, part of a huge programme of digitisation for government services, including pensions and all major taxes, on which the ABI are making substantive representations. The government is committed to moving forward in this area, but engagement with industry has made clear the need to do so one step at a time.
In VAT, a number of issues have receded. Others will emerge. Recent European Court of Justice (CJEU) judgments have greatly limited opportunities for sharing VAT costs in financial services or across EU borders, emblematic of constraints generally. While HMRC has undertaken not to implement the Aspiro judgment for the foreseeable future, this will eventually require action – to legislate for this position when the Brexit transition period ends – rather than inaction. HMRC’s review of VAT grouping flexibility – which started informally in February 2016 – continues fitfully, even as the presence of overseas group members is aggressively questioned.
Meanwhile, the explanatory notes to the Taxation (Cross-border Trade) Bill state that the new standalone regime 'will continue in much the same way as before’, though this is not necessarily reflected in the legislation, and Parliament is waking up to the implications for businesses - large and small - including a potential cashflow hit for importers of goods.
The Office of Tax Simplification (OTS) published its report on possibilities for the VAT regime. The Chancellor has apparently accepted all of the recommendations, and changes to the registration threshold were considered for the Budget. But other recommendations - including a long-overdue review of rates and reliefs – are deferred until HMRC has the bandwidth (and the government the majority) to consider any radical changes to the VAT landscape.
IPT was the dog that didn’t bark in November’s Budget, but whether this is a rethink or more likely a pause is uncertain – despite the standard rate being doubled within two years, it’s too early to call time on further increases, and the ABI will advocate accordingly.
March should see the course ahead being sketched out rather than introducing legislative change. Brexit variables suggest a detailed roadmap is an exercise in wishful thinking, but we may have some time to engage in those areas where we have concrete proposals to work with.
Those areas remain too few. The direction of travel is clearer but the details are somewhat vague, and as the economy battles headwinds, sometimes devolved but often Brexit-related, we can expect further pressures on public finances and a constrained government, subject to various pressures and greater scrutiny, still looking for the feathers which can be plucked with minimal hissing.