Chris Sanger

As the Chancellor has reiterated on a number of occasions, the Spring Statement is not intended to be a major fiscal event, like Autumn Statements of the past. It is instead an opportunity to provide the Government’s public response to economic forecasts from the OBR  and a launchpad for early tax consultations, to allow for an 18 month period, before inclusion in the Finance Bill.

However, during the last Budget speech in October he did reserve the right to upgrade this Spring Statement into a Spring Budget, but with Brexit negotiations ongoing it unlikely the Chancellor will choose to do this.

Will the Chancellor’s cupboard be bare?

Last year’s Spring Statement provided a platform to announce some blue sky thinking and a number of consultations to advance UK tax policy, but with HMRC and HMT’s resources and focus since then diverted to Brexit planning, the cupboard is likely to bare few, if any, new consultations and ideas to put before the House.

This view is consistent with the launch in the last few weeks of some long-awaited consultations, including the plastic packaging tax and off-payroll working rules for the private sector.

There are still some big issues bubbling in the background

That said, however, there are some big issues bubbling away in the background, such as the tax response to the Taylor Review on the role of the self-employed. But it is unlikely HMT will launch a consultation into this with their focus and efforts concentrated elsewhere.

While Wednesday’s speech may well be consultation-light, fundamental changes to the UK’s tax administration continue apace. For example, Making Tax Digital (MTD) for VAT submissions that is scheduled for launch next month driven in part by HMRC’s intention to reduce the tax gap arising out of error, mistake and failure to take reasonable care.

Digital Services Tax

What the Chancellor may include in his speech are some updates on a number of policies already in play. One of those, that is attracting the most attention, is the taxation of the digital economy.  Whilst the UK has been proceeding with the further development of its own proposals for a Digital Services Tax (DST), the EU has been debating over what form, if any, its DST will take and will discuss this on the day before the Spring Statement at the ECOFIN (Economic and Financial Affairs Council) meeting. Similarly, the OECD, with its Inclusive Framework of 128 countries, has just completed a very short consultation period on its proposals for changing the tax rules, covering three different options: recognising user contributions; rewarding consumer market countries; and changing the rules that trigger a taxable presence.

This is moving the debate away from tax avoidance and onto which countries can claim taxing rights from others over the profits of multinationals.  Without agreement between countries, we are likely to end up with double taxation of profits and unpredictable taxation where companies have to navigate complex rules in each jurisdiction in which they operate.

Under more normal circumstances, we might expect the Chancellor to update on where his thinking on DST is heading, considering there is a go live date of April 2020. However, with Brexit votes on either side of the Statement, he may well choose to delay his decision until Legislation Day (or ‘L Day’), around July, when he is due to publish the draft finance bill for consultation. He may in fact choose to publish other consultations on L Day, if Brexit negotiations have progressed further.