13 March 2019

Spring Statement 2019: What you need to know

Economic matters and the government finances very much dependent on Brexit

Against a backdrop of continuing uncertainty over Brexit, the Chancellor’s speech today was mainly concerned with economic matters and the government finances, which are very much dependent on what finally happens regarding Brexit.

Most of the figures that the Chancellor gave during his speech are on the basis that there will be an orderly Brexit. If this is achieved, the Chancellor is predicting steady growth in the economy and a gradual reduction in public sector borrowing over the next four years. He also gave a warning that in the event we leave the European Union without a deal we will be facing very different economic circumstances and the figures given in his speech will need to be revisited.

The government are expecting the economy to grow by 1.2% in the current year rising to 1.4% in 2020 and 1.6% in each of the years from 2021 to 2023. In terms of the public sector borrowing requirement this is expected to be £29.3 billion during the 2019/20 year before falling gradually to £13.5 billion in the 2023/24 year which will be its lowest in the last 22 years. The ratio of government debt to GDP is currently 82.2% and this is expected to fall to 73% by 2023/24 year.

There were a few measures relating to tax announced today although these were not included in the actual speech itself. They are largely related to anti-avoidance measures, making tax digital, and consultations on various proposed changes to the tax system previously proposed that have not yet come into effect.
A paper has been published setting out what the government has achieved since 2010 in the area of tacking tax avoidance, evasion and other forms of non-compliance and a second paper sets out the government’s ongoing strategy in relation to offshore tax compliance.

There was more information published on the new Structures and Buildings Allowance including draft legislation. This relief applies to expenditure on business premises and is given at the rate of 2% per annum for the first fifty years of the buildings life. It is likely that the proposals will become law before the summer parliamentary recess, but when it does the relief will be available for expenditure incurred on or after 29 October 2018 for which there was no written contract in place before that date. 

The government confirmed that the scope of making tax digital will not be extended beyond its current reach in 2020. This means that from April this year until at least April 2021 it will only apply to VAT returns being made by a business that has turnover in excess of £85,000 per annum. It is still very likely that it will be extended to smaller businesses and other taxes at some point in the future.

Further papers are expected to be published over the coming months on various tax measures first announced in the autumn budget of 2018, with a view to legislation being introduced in the Finance Bill that will be published towards the end of this year.  These include anti-avoidance legislation relating to research and development tax credits, restricting the availability of certain reliefs on the disposal of an individual’s principal private residence, and restricting employment allowance to smaller businesses by limiting it to those with an employer’s national insurance liability of less than £100,000 in the previous year.

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