New Prime Minister Liz Truss has pledged to ‘ride out the storm’ and deliver a ‘pro-growth’ tax-cutting agenda, while also tackling the cost of living crisis.
Tax will be ‘front and centre’ of Chancellor Kwasi Kwarteng’s in-tray, noted Tim Sarson, head of tax policy at KPMG. In addition to announcement on energy bills which is expected imminently, ‘the new chancellor will need to deliver some tax cuts promised during the campaign – notably the reversal of the NI rate rise (at a cost of £13bn per annum) and the reversal of the CT rate rise (estimated to cost £17bn per annum),’ he said.
‘Also on the agenda will be boosting growth and productivity which has been listless since the global financial crisis in 2008. Reversing the CT rate rise may well help, but there may be a case for other measures more targeted at growing specific areas of the economy (for example, green initiatives)’, Sarson added.
Although Truss has promised a review of IR35, Andy Vessey, head of tax at Kingsbridge, noted that the prime minister ‘has bigger issues to tackle’ and doubted whether it would go ahead. ‘While a review would be welcomed, I am not expecting a radical outcome in the near or distant future given that, during its 22 year history, little has been achieved in making IR35 simpler, fairer and able to provide certainty,’ he said.
On the issue of international cooperation on BEPS, there has been some speculation that the new government may not implement the Pillar Two global minimum tax. According to EY: ‘Assuming that she wants to proceed with Pillar Two, we would expect the new government to argue that GloBE is in the “stopping companies circumvent the tax system” category above and hence outside the “no new taxes” pledge.’
On the cost of implementing these pledges, Charlotte Sallabank, tax partner at Katten Muchin Rosenman UK, said: ‘For the moment, Liz Truss does not seem to be interested in taking heed of economists and former chancellors who have voiced grave concerns over how the tax cuts will be paid for, not to mention the inflationary aspect of tax cuts. But as her new chancellor has pronounced himself to be fiscally responsible, there may be some tensions to come between the two.’
There is speculation that an emergency budget or fiscal event will be held later this month, perhaps on 21 September. As EY observes, any emergency budget would need to take place before the Commons rises for conference recess on 22 September.
New Prime Minister Liz Truss has pledged to ‘ride out the storm’ and deliver a ‘pro-growth’ tax-cutting agenda, while also tackling the cost of living crisis.
Tax will be ‘front and centre’ of Chancellor Kwasi Kwarteng’s in-tray, noted Tim Sarson, head of tax policy at KPMG. In addition to announcement on energy bills which is expected imminently, ‘the new chancellor will need to deliver some tax cuts promised during the campaign – notably the reversal of the NI rate rise (at a cost of £13bn per annum) and the reversal of the CT rate rise (estimated to cost £17bn per annum),’ he said.
‘Also on the agenda will be boosting growth and productivity which has been listless since the global financial crisis in 2008. Reversing the CT rate rise may well help, but there may be a case for other measures more targeted at growing specific areas of the economy (for example, green initiatives)’, Sarson added.
Although Truss has promised a review of IR35, Andy Vessey, head of tax at Kingsbridge, noted that the prime minister ‘has bigger issues to tackle’ and doubted whether it would go ahead. ‘While a review would be welcomed, I am not expecting a radical outcome in the near or distant future given that, during its 22 year history, little has been achieved in making IR35 simpler, fairer and able to provide certainty,’ he said.
On the issue of international cooperation on BEPS, there has been some speculation that the new government may not implement the Pillar Two global minimum tax. According to EY: ‘Assuming that she wants to proceed with Pillar Two, we would expect the new government to argue that GloBE is in the “stopping companies circumvent the tax system” category above and hence outside the “no new taxes” pledge.’
On the cost of implementing these pledges, Charlotte Sallabank, tax partner at Katten Muchin Rosenman UK, said: ‘For the moment, Liz Truss does not seem to be interested in taking heed of economists and former chancellors who have voiced grave concerns over how the tax cuts will be paid for, not to mention the inflationary aspect of tax cuts. But as her new chancellor has pronounced himself to be fiscally responsible, there may be some tensions to come between the two.’
There is speculation that an emergency budget or fiscal event will be held later this month, perhaps on 21 September. As EY observes, any emergency budget would need to take place before the Commons rises for conference recess on 22 September.
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