CIOT criticises Budget for lack of coherence

CIOT has expressed concerns about the way that last week’s Budget was delivered, noting the lack of prior consultation and the number of measures announced as completed with little opportunity to explore their scope and operation

In their response to the Budget for the Treasury Committee, CIOT noted that the Budget contains fewer tax changes than those in recent years, linking this to the current state of negotiations with the EU, but that those announced were touted as ‘”done deals” or for immediate implementation, with either no or inadequate consultation’.

Although it found that the Budget was likely to provide certainty and stability, it expressed concern about its fairness and coherence, and overall described it as producing ‘cautious approval, with some reservations’ from the institute.

The assessment also criticised the fact that a number of the measures announced will have an immediate effect, in particular enterprise reliefs such as the structures and buildings allowance (SBA): ‘Whilst a relief for this type of expenditure may be welcome, we are concerned that it is being introduced with no prior consultation, giving little opportunity to explore its scope, operation etc. This is compounded by the fact that it will have immediate effect, giving no relief for previous expenditure, nor giving businesses the opportunity to factor into the availability of the allowance in their investment decisions.’

CIOT’s response to the Budget was most positive about the proposals to put voluntary tax returns on a statutory footing, changes to Universal Credit and the withdrawal of the shared occupancy test.

The announcement of the Digital Services Tax (DST) was poorly received, with CIOT saying that ‘this interim tax is very much a second-best solution and the downside risks are of provoking retaliation which could affect UK-based businesses…or “copycat” measures which may be less narrowly targeted. Ultimately governments are more likely to be able to tax global multinationals effectively by working together rather than each going their own way’.

Also criticised was the deferral of reform of HMRC’s penalties regime, in particular its relation to the introduction of Making Tax Digital (MTD). The institute noted that ‘in the present case, the penalty regime designed for MTD will not be in place until at least two years after MTD becomes mandatory for VAT. The existing penalty regime for VAT is not well suited to MTD, and we are concerned around the complexities and administrative burdens that will result.’

Glyn Fullelove, chair of the CIOT’s Technical Committee, commented: ‘The government has a very good consultation process for tax measures which, when followed, usually results in good, effective legislation. But too often it is being bypassed and we end up with bad law which needs patching up at a later date.

‘Philip Hammond’s move to a single fiscal event was a very positive step, which should have freed up time for more and better consultation on tax measures. But last week’s Budget shows that the temptation to launch surprise, sometimes instant, measures on an unsuspecting public is still not being sufficiently resisted.’

An HM Treasury spokesperson said: 'We engage widely with stakeholders and groups when developing Budget measures and this year is no different.
'The majority of the Finance Bill was published in draft and consulted on earlier this year.  The final Bill has now been published and Parliament will have the usual opportunities to scrutinise the Bill ahead of it becoming law.
'We will also consult on a number of key tax measures announced at the Budget, including the Digital Services Tax, ahead of their implementation, giving the public the opportunity to feed into the proposals.'

CIOT’s response to the Autumn Budget is here 

Report by James Bunney

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