Today, the Chancellor Phillip Hammond gave his first Spring Statement speech to the House of Commons. This a new event in the UK’s fiscal calendar following the announcement back in 2016 that he would be moving the Spring Budget to the Autumn and replacing the Autumn statement with a new Spring statement.
The change in the main Budget dates was designed to align ourselves better with other countries and unlike the Autumn Statement which in effect was a ‘mini-budget’, the Spring statement is intended to give the Chancellor the opportunity to respond to the most recent forecasts for the UK economy from the Office or Budget Responsibility and true to his word, there was no red box, no official document, no spending increases and no tax changes.
Mr Hammond used his speech to set out the outlook for the UK economy which was expected to grow more quickly than expected and to list a series of tax consultations including Alternative methods of VAT collection, corporation tax and the digital economy and financing growth in innovative firms (Enterprise Investment Schemes).
Forecast GDP growth for the UK remains unchanged at 1.3% in 2019 and 2020 before picking up to 1.4% in 2021 and 1.5% in 2022. While government borrowing is expected to decrease, it is forecast to fall from £45.2bn this year to £28.7bn in 2020-21 and £21.4bn by 2022-23.
According to the Chancellor, “our economy will remain outward looking, confident and ready to compete with the best in the world”.
The Chancellor reiterated that the Government is the “champion of small business” and subsequently, much of the statement touched upon aspects relevant to small business owners and entrepreneurs throughout the UK.
We have outlined the salient points below:
Business rates revaluation brought forward to 2021
At the Autumn Budget 2017 it was announced that business rate revaluations will now take place every three years, as opposed to five years. The move will ensure rates better reflect the market rental value of commercial properties.
Mr Hammond confirmed that the next revaluation will be brought forward from 2022 to 2021. The move will help businesses to benefit from the change to three-year revaluations sooner.
Consultation on new VAT mechanism for digital sales in the UK
The Chancellor also unveiled a new consultation on a prospective VAT collection mechanism for all UK-based digital sales, ensuring the VAT that online consumers pay “actually reaches the Treasury”.
The ‘cash and digital payments in the economy’ consultation paper will be open until early June to investigate the transition between traditional cash and digital payments and the impact on specific sectors, regions and demographics.
Mr Hammond also confirmed there will be a review into how to help the least productive businesses catch up with their competitors and how to eradicate late payments to the UK’s small businesses
A commitment to apprenticeships and training
The Government remains committed to delivering three million apprenticeships throughout all sectors by the turn of the next decade.
The Chancellor acknowledged the concerns among the small business community about employing apprentices and announced the Education Secretary “will release up to £80 million of funding to support small businesses in engaging apprentices”.
In his 26 minute speech, the Chancellor made little reference to Brexit, but noted that in its report, the Office for Budget Responsibility has estimated the cost of the Brexit divorce Bill that the UK will pay after leaving the EU on 29 March 2019.
This is likely to be in the region of £37.1bn with the UK paying contributions until 2064.
Elsewhere, the Chancellor gave the clearest hint yet that he is prepared to increase spending on health in recognition of the pressures facing the NHS and the potential for a new ‘tech tax’ aimed at how firms like Google and Facebook are currently taxed.
The change in the main Budget dates was designed to align ourselves better with other countries and unlike the Autumn Statement which in effect was a ‘mini-budget’, the Spring statement is intended to give the Chancellor the opportunity to respond to the most recent forecasts for the UK economy from the Office or Budget Responsibility and true to his word, there was no red box, no official document, no spending increases and no tax changes.
Mr Hammond used his speech to set out the outlook for the UK economy which was expected to grow more quickly than expected and to list a series of tax consultations including Alternative methods of VAT collection, corporation tax and the digital economy and financing growth in innovative firms (Enterprise Investment Schemes).
Forecast GDP growth for the UK remains unchanged at 1.3% in 2019 and 2020 before picking up to 1.4% in 2021 and 1.5% in 2022. While government borrowing is expected to decrease, it is forecast to fall from £45.2bn this year to £28.7bn in 2020-21 and £21.4bn by 2022-23.
According to the Chancellor, “our economy will remain outward looking, confident and ready to compete with the best in the world”.
The Chancellor reiterated that the Government is the “champion of small business” and subsequently, much of the statement touched upon aspects relevant to small business owners and entrepreneurs throughout the UK.
We have outlined the salient points below:
Business rates revaluation brought forward to 2021
At the Autumn Budget 2017 it was announced that business rate revaluations will now take place every three years, as opposed to five years. The move will ensure rates better reflect the market rental value of commercial properties.
Mr Hammond confirmed that the next revaluation will be brought forward from 2022 to 2021. The move will help businesses to benefit from the change to three-year revaluations sooner.
Consultation on new VAT mechanism for digital sales in the UK
The Chancellor also unveiled a new consultation on a prospective VAT collection mechanism for all UK-based digital sales, ensuring the VAT that online consumers pay “actually reaches the Treasury”.
The ‘cash and digital payments in the economy’ consultation paper will be open until early June to investigate the transition between traditional cash and digital payments and the impact on specific sectors, regions and demographics.
Mr Hammond also confirmed there will be a review into how to help the least productive businesses catch up with their competitors and how to eradicate late payments to the UK’s small businesses
A commitment to apprenticeships and training
The Government remains committed to delivering three million apprenticeships throughout all sectors by the turn of the next decade.
The Chancellor acknowledged the concerns among the small business community about employing apprentices and announced the Education Secretary “will release up to £80 million of funding to support small businesses in engaging apprentices”.
In his 26 minute speech, the Chancellor made little reference to Brexit, but noted that in its report, the Office for Budget Responsibility has estimated the cost of the Brexit divorce Bill that the UK will pay after leaving the EU on 29 March 2019.
This is likely to be in the region of £37.1bn with the UK paying contributions until 2064.
Elsewhere, the Chancellor gave the clearest hint yet that he is prepared to increase spending on health in recognition of the pressures facing the NHS and the potential for a new ‘tech tax’ aimed at how firms like Google and Facebook are currently taxed.