MPs spent four days this week debating the Budget and related policy issues, before voting on the Budget resolutions on Thursday (1) evening.
Party main messages
The government’s overarching Budget message is that the hard work of the British people is paying off, and thanks to the Conservatives' careful fiscal management and solid economic recovery, austerity is coming to an end. But discipline remains and the recovery would be put at risk by Labour’s approach. Of the ten Budget key messages on the party’s website six relate at least in part to tax, namely:
- We're cutting income tax for 32 million people
- We're backing British high streets (including business rates cuts)
- A new 2% digital services tax (to ‘make sure large digital firms pay a fair share of tax to support our public services’)
- Beer, cider and spirits duty frozen
- We're helping more people get on the housing ladder (including stamp duty measures)
- Fuel duty frozen again
Labour Leader Jeremy Corbyn’s message in his Budget response was that whatever the Chancellor claimed in his Budget, austerity is not over. Far from building a strong economy, eight years of austerity has damaged our economy, delayed and weakened the recovery, and endlessly postponed fixing the deficit, he said. Speaking on day two of the debate, Shadow Chancellor John McDonnell suggested that voters no longer believed the ‘myth’ that austerity was necessary, as he accused the government of handing out ‘£110 billion in tax cuts to the rich and corporations while their services are being cut and their children are forced into poverty’. Shadow Treasury Minister Anneliese Dodds said the Chancellor had the chance to put public finances on a more sustainable footing, by cancelling his planned cuts to corporation tax and adopting Labour’s more progressive approach to income tax, which would require the top five per cent to contribute more, but he chose not to do so.
Additionally Peter Dowd, Shadow Chief Secretary to the Treasury, complained that the Conservatives have obstructed substantive scrutiny of three Finance Bills in a row by not permitting any amendments to the law, which is unprecedented. The power grab by Ministers continues in the Budget resolutions—for example, in resolution 79, which is worryingly designed to give Ministers the ability to amend key tax legislation ahead of Brexit without parliamentary oversight, he said. On employment, he said since 2008 only one in 40 net jobs created has been full time.
Scottish National Party
The SNP attacked “a budget that failed to change course on the economy, failed to reverse the deeply damaging cuts to social security and failed to rule out a job-destroying no deal Brexit.” Scottish Finance Secretary Derek Mackay said that “the Scottish Government’s resource block grant from the UK Government – the money we are able to invest in day to day public services – remains almost £2 billion lower next year compared with 2010-11.” Westminster SNP leader Ian Blackford said he did not believe this is the end of austerity because the IFS has made clear that even the mildest version of “ending austerity” would cost a minimum of £19 billion, the equivalent of a penny on income tax, national insurance and VAT. To end austerity, the Chancellor would need to cancel the final year of the four-year freeze on benefits and reverse cuts in in-work benefits introduced as part of the roll-out of the new universal credit system, he said.
Lib Dem leader Vince Cable dubbed the Budget "a standstill non-event" and “a sticking plaster Budget”. He continued: “If we are to see an end to austerity, then we need a proper injection of cash - at least £19bn according to the IFS - in our public services. The Chancellor said he could end austerity without raising taxes, but that is highly unlikely in practice.” Edward Davey said that the ‘Brexit Budget’ had been designed to placate Conservative backbenchers and DUP MPs. He said that ‘the government could not put forward the tax rise needed to get the Budget into surplus and to invest in public services because they could not get that tax rise through their back benchers’.
Contributions to the Budget debate by tax / policy area
Income tax and national insurance
Labour MPs spoke out against the increase in the higher rate threshold but their views on the personal allowance were more nuanced – mostly cautious support but pointing out that the very poorest would not benefit from it. Jeremy Corbyn said that “the very lowest earners and insecure workers on zero-hours contracts or short-hours contracts will not benefit from the increase in the threshold”. Shadow Communities Secretary Andrew Gwynne said putting more money into the pockets of higher earners is ‘obviously wrong’. Yvette Cooper welcomed the extra help for basic rate taxpayers but said cutting taxes for higher rate taxpayers is the wrong approach: “It means that millions of the lowest-paid workers will not benefit at all because they do not pay enough tax, while millions of the highest-paid workers will benefit the most.” Julie Cooper said that despite the increase in the tax-free personal allowance, every extra pound earned over £12,500 would be taxed at a marginal rate of 32 per cent, contrasting this with ‘the tax paid by the multimillionaire who, barely lifting a finger, reaps the benefits of stock market wheeling and dealing, and pays capital gains tax at a mere 20%’. Yvonne Fovargue suggested that the changes to the personal allowance would have a greater material benefit on the rich. Karen Lee lamented that ‘tax cuts costing £2.8 billion will benefit high-income households at the same time as we see a cash freeze on working-age benefits’. Labour tabled an amendment setting out the changes to income taxation that they would introduce (see below).
Sir Vince Cable, Lib Dem Leader, said that raising the higher rate threshold was, “frankly, something that the country simply cannot afford; at a time when universal credit is being only partially financed following the cuts made by the Osborne Budget three years ago—only about half of that cut has been reinserted—that should be the priority.” Lib Dem DWP spokesman Stephen Lloyd asked MPs to support the Lib Dems and vote against the tax cut for those earning more than 50k.”That £1.3 billion could be put into the work allowance to make it back up to what it was before George Osborne slashed it in 2015,” he said. The Lib Dems forced a vote over the income tax resolution (see below) and were joined in the lobby by 20 Labour MPs including Lisa Nandy and Yvette Cooper. The Labour frontbench controversially abstained. Shadow Treasury Minister Jonathan Reynolds explained: “We oppose the budget and will vote against it, but we’re not going to promise to reverse the tax threshold changes because we already have better policy for a fully progressive tax system, and we’ve promised to only raise income taxes for the top 5% of earners.”
SNP Treasury spokesperson Alison Thewliss said that the increase in the personal allowance was unlikely to benefit those on the lowest incomes because they don’t earn enough. Hywel Williams (Plaid Cymru) said the Welsh economy is badly skewed towards the low-wage sector, so the Chancellor’s kindly treatment of higher rate tax payers will have a more limited effect on incomes in Wales, and will potentially have a huge effect on the Welsh Government’s new tax-raising powers.
Conservative MPs enthusiastically backed both elements of the income tax cut. Greg Hands said meeting the 2015 manifesto commitments on the personal allowance and on the £50,000 higher rate threshold one year early was very encouraging. Marcus Jones said the threshold hike would help alleviate the problem of many public sector workers and tradespeople being ‘dragged’ into the higher rate. George Freeman spoke of his desire to see a program of tax cuts target at those on the lowest incomes as part of a broader economic revival. Sir Robert Syms said that doubling the personal allowance to £12,500 in eight years of Conservative-led government had ‘massively’ increased incentives to work and resulted in record levels of employment. Sir Robert also welcomed the higher rate threshold increase, ‘because that lifts all the tax bands for many middle earners’.
Former Conservative cabinet minister Priti Patel wants to see the ‘promotion of economic freedoms, led by pioneering policies on tax reform and simplification of the tax system’, for example, by integrating income tax and national insurance into a single tax, to reduce complexity and bring parity between the employed and the self-employed. That would enable the government to lower the tax burden further, so that people can keep more of the money they earn, she said.
Digital Services Tax
The Digital Services Tax (DST) was widely welcomed though with a widely held view – especially among opposition MPs – that the expected take, £400 million per annum, was too modest. Among Conservatives Kemi Badenoch said “addressing the huge profits that the biggest companies make through their activity in the UK recognises the changing nature of the digital economy and the issues that accompany that”. Kevin Hollinrake said “our job here is to level the playing field—not to pick winners—and [the Chancellor’s] actions are doing exactly that”. The UK Government are leading the way in clamping down on the admittedly difficult and perhaps unsavoury practices of multinational tech firms, said Bim Afolami. Damien Moore spoke of a ‘David and Goliath’ battle between online and high street retailers. Scott Mann said the tax on internet giants shows ‘that the Chancellor has the best interests of small and independent stores at the heart of government’. Scottish Conservative Paul Masterton said it was right that we tackle ‘this threat to the sustainability of the tax system’ though narrow targeting was ‘key so that we do not hit tech start-ups’.
However some Conservatives emphasised that multilateral action would be preferable. Andrew Mitchell said it would be better if the DST were rectified through OECD agreement. Tom Tugendhat said: “This is about addressing some of those so-called FANGs—Facebook, Amazon, Netflix, and Google—and the fact that over a few years, they have acquired the controlling heights of an economy and the best programmers and engineers, then rewarded them with share options and tax schemes that effectively mean nobody can else can afford to hire them. They have taken over a rent-generating state in much the same way as other industries did in times past. Therefore, addressing that through taxation—the Chancellor has begun to do that, but it really does require a global response—is an essential part of reforming the economy”.
Chartered accountant Nigel Mills cautiously welcomed the DST, but was concerned about exactly how it could be made to work—‘how we can define income so that we catch the companies that we want to catch, without catching the online sales of high street businesses such as Tesco or John Lewis’. However, he said the only money that we actually see in the UK is the money that our consumers are paying to buy goods or services from those companies, and trying to secure more tax from that cash flow is probably the only effective method.
Sir Geoffrey Clifton-Brown described the digital services tax as ‘unambitious’ , exempting ‘hundreds, and maybe thousands’ of businesses as a result of the 2 per cent rate and other conditions set out by the government. He hinted that more could be done to increase revenues and support public services. Noting a trend, he said Philip Hammond had introduced the diverted profits tax ‘to start to deal with the issue of international companies not paying proper tax in the UK, but that has only raised £388 million’.
Treasury Committee chair Nicky Morgan said the DST was an issue of fairness. She looked forward to questioning the Chancellor on ‘these issues’ at future scrutiny sessions.
For Labour Jeremy Corbyn dismissed the DST as ‘too little, and too late’. John McDonnell contrasted the £400 million the government said could be raised through the levy with a report from the Tax Justice Network suggesting that the top five tech companies had ‘avoided’ £5 billion worth of tax. Anneliese Dodds, Shadow Financial Secretary, said the safe harbour principle within the DST and the double threshold rule seem to be subject to “exactly the same problems that have beset this government when they have tried and failed to raise corporation tax from many of these digital giants; this seems to be riddled with loopholes and inadequate. What we really need is a more thorough-going approach, of the type that Labour set out in our tax transparency and enforcement programme.”
Labour backbenchers rode in behind their leaders on the issue. Chris Evans said for a small business that has been set up as an internet retailer, it is a ‘slap in the face’ when they see large internet companies getting away without paying their tax and the Government’s response is ‘piecemeal’. Wes Streeting said: “If anyone wants to see the futility of this Conservative Government encapsulated in just one Budget measure, they should look at the so-called digital tax. It will bring in a paltry amount of money from the tech giants, which will be given back to them after a few years in corporation tax cuts.” Nick Smith said the proposals were ‘long overdue’ but ‘well short of what is required’. £400 million is 0.7 per cent of what corporation tax raises, said Steve McCabe. Debbie Abrahams said that the DST ‘sounds great’ but would fail to address the fundamental question of profit shifting. Rachel Reeves, chair of the Business, Energy and Industrial Strategy Committee, noted the high uncertainty associated with achieving even a £400 million take, and accused the government of not acting with sufficient urgency.
Meg Hillier, who chairs the Public Accounts Committee, was another who noted that the DST levies only up to £400 million, and that will not recover the tax that some of the big tech giants have avoided through their complex multinational tax arrangements, she said. She added that it was important for growing start-up businesses to be ‘protected’ from the tax.
Her predecessor as PAC chair, Dame Margaret Hodge, called the DST little more than a ‘public relations stunt’. She said: “The Red Book projects that it will be 2022-23 before we raise just £400 million from this tax. A recent Tax Watch report calculated that in 2017, Google, which paid only £49 million in corporation tax, should have contributed £356 million, and that Facebook, which paid only £16 million, should have paid £127.5 million. Just two companies, Google and Facebook, should have paid £480 million in 2017, far exceeding the £400 million the government estimate they will get some five years down the line from all large digital corporations. Hardware companies such as Apple and Microsoft will not be covered by the tax. Video and audio platforms, such as Netflix and Spotify, will not be caught either. Airbnb and Uber will argue that their marketplaces are not online. Even Google and Facebook will be able to exclude some of their profits.”
For the SNP Kirsty Blackman welcomed the DST but lamented the lack of detail. She put forward two SNP measures for the taxation of digital businesses, namely that online retailers should be held liable for tax fraud committed by their suppliers and that corporation tax should be levied on digital businesses based on an assumed UK share of worldwide profits equal to their UK share of worldwide revenue, supported by a tribunal process. The SNP will bring forward these suggestions as part of the formal consultation process, she said.
Defending the proposal, Exchequer Secretary to the Treasury Robert Jenrick said the UK was the first major country to do this, and it will maintain a tech-friendly economy while ensuring that those who generate value from UK users will pay a fair contribution to tax. We look forward to publishing more information and to the consultation on that, he said.
Business rates rivalled income tax changes and the Digital Services Tax for the most popular tax topic during the Budget debate. Conservative MPs welcomed the increased relief for suffering businesses, but many remain unmoved in their dislike of the levy. Marcus Jones described it as an ‘analogue tax in a digital world’. Sir Geoffrey Clifton-Brown said the present system was not necessarily linked to the ability to pay and suggested that a fundamental review of the business rates system was needed after the UK leaves the EU. Ben Bradley would also like to see the Treasury undertake a fundamental reform of business rates. “It is a 20th-century tax in the 21st century”, he said.
On the Labour benches Anneliese Dodds said the changes to business rates only make good on the damage due to the government’s botched evaluation back in 2017 and we desperately need not these temporary measures but a proper root-and-branch review of the business rates system. Chi Onwurah said business rates relief would not have saved a single House of Fraser or Debenhams. Rachel Reeves complained that the announced changes to business rates, while welcome, are worth just a quarter of the additional cut to corporation tax. Debbie Abrahams welcomed the government’s commitments on business rates but asked whether councils would be recompensed for the money they would lose as a result. Rachel Maskell said that a turnover or profit-based tax “is far fairer [than business rates] and will create the greater equality that we need".
Business taxation (general and other)
Secretary of State for Business, Energy and Industrial Strategy Greg Clark said the fivefold increase in the annual investment allowance will help to support firms as they invest and grow. His colleague Colin Clark agreed, saying the change to AIA is “transformative for the grafters, for the white van man and for SMEs the length and breadth of this country. This is not a fat-cat tax bonus; it will potentially unlock hundreds of millions of pounds”. James Morris, also Conservative, said the increase will encourage investment, encouraging people to plan for the long term, but in the end it is the business people—the individuals, the entrepreneurs—who will drive our economy forward as we look to the future post Brexit.
Independent MP Charlie Elphicke said if we cut the corporation tax rate, we ‘up the take’. Some £750 billion on corporate balance sheets has not been spent, he said. There is a conundrum as to why that money is not being invested. We must consider the possibility of time-limited, perhaps very generous, investment allowances to get those corporates to invest in our economy, he added.
Stephen Kerr, Conservative, has an ongoing concern about the availability of quality patient capital, especially for small and medium-sized enterprises. Robert Courts said there are record numbers of new businesses, which means more jobs and more wages.
Labour Shadow Business Minister Chi Onwurah said that, on research and development, the Budget contained ‘another repackaging of money that was announced last year’. She complained: “There is still no overarching strategy for its direction or for how the Government intend to meet their target of spending 2.4 per cent of GDP on R&D” (Labour’s target is three per cent). Sandy Martin asked: “Where is the national transformation fund that Labour promised?”
Off-payroll / self-employment
Stephen Hammond, Conservative, said HMRC’s application of IR35 rules was often retrospective, unresponsive and unfair. Under modern working arrangements, contractors are often working and employed for longer than they used to be. He understands the need for the rules, but there is an issue with the certainty and consistency of their application. However Chi Onwurah. Labour. said that the Government’s failure to immediately reform the IR35 rules shows that they are refusing to take tax avoidance seriously. By pushing back those reforms to 2020, the government are denying themselves much-needed revenue, she said. Her Labour colleague, Faisal Rashid, however, found it ‘utterly shameful’ that the Budget aims to claw back £700 million from the self-employed by reforming off-payroll working, compared to only £400 million from the tech giants.
Labour MPs queued up to express their anger at the implementation of universal credit (UC). PAC chair Meg Hillier said the problems with UC were predicted, foreseeable and exacerbated by the £2 billion of cuts under George Osborne. Wes Streeting said UC was underfunded, chaotic and designed to be a punishment for being poor. Today’s increases in the work allowances only replace cuts that were made previously, added Ruth Cadbury. Chi Onwurah, from the Labour frontbench, said the £1.7 billion promised to universal credit is less than a third of the £7 billion of social security cuts still to come. Jim Cunningham said say providing £1 billion of extra money over five years will make a difference, but not much, to those losing out. Matt Rodda pointed out that the roll-out of universal credit has now been delayed for the seventh time; he called for it to be scrapped.
Among the Conservatives, Heidi Allen said a single parent not in receipt of housing benefit will see their work allowance improve from £397 to £492, but it will still not be where it should have been on pre-2015 figures, which is £734. Anyone who is concerned about the total impact of UC should take great comfort from the fact that more money will be spent on the new system than was spent on the old system, said Chris Philp. David Davis said that the tax credits and benefits system introduced by Gordon Brown all too often trapped people in a cycle of dependency.
Ian Blackford, SNP, said that, according to the Red Book, the investment in UC through the work allowance next year will be £545 million, but the Joseph Rowntree Foundation tells us that £2 billion is required. His party colleague Neil Gray wanted work allowances to be fully restored to pre-2015 levels.
There are four big changes that the Government have yet to announce that will be necessary if we are to be satisfied that universal credit can be rolled out safely to every one of our constituents, said Frank Field, Independent MP and chair of the Work and Pensions Committee. These are extending legacy benefits right up to the time when people claim universal credit, childcare payments should be paid up front, need a system of citizens banks that work with universal credit and are targeted at people on universal credit, so that they can get a loan up front and the guardians of the roll-out ought to be Citizens Advice.
Secretary of State for Housing, Communities and Local Government James Brokenshire said steps taken by the government have led to an increase in home ownership, and the first time buyer rate has started to increase. The extension of relief to all first-time buyers of shared ownership properties worth up to £500,000 and making it retrospective, ‘is good news for anyone who aspires to own their own home’, he said. Kemi Badenoch backed him up, saying “I welcome the fact that stamp duty is now also being abolished for first-time buyers of shared ownership, because that was the type of property that helped me on to the housing ladder.” Fellow Conservative James Cartlidge said first-time buyers are now making a ‘strong comeback’ because of the brave measures the Government took in relation to buy-to-let landlords, such as changing the stamp duty and the way we treat interest, which means that first-time buyers are now not only on a level playing field but in many parts of the country have the upper hand again.
Greg Hands welcomed measures to encourage the conversion of surplus retail to residential properties, ‘which is incredibly important in constituencies such as mine, where we have a lot of retail space that has been dead since even before Amazon came along’. Hands also said stamp duty land tax is too high, including at the top of the market. Among his complaints about stamp duty is that it encourages the over-development of homes, encourages over-conservativism in property moves and it heavily penalises downsizers.
David Davis said Help to Buy was failing: it is not increasing the supply of housing; rather, it is increasing the cost of new homes by 15 per cent and inflating developers’ bonuses, and it should be scrapped immediately, he charged. Priti Patel wants to see reform of property taxes, including stamp duty, to promote and support home ownership.
Nicky Morgan, Conservative, said the OBR says that increased trade barriers with the EU, not just tariffs, will likely leave our economy smaller and reduce long-run productivity growth. The Government should not wait for Brexit before moving forward on their domestic policy agenda, she said. Ed Davey, Lib Dem, said that, according to the OBR, Brexit ‘has already cost £15 billion in lost tax revenue, and we hear in the Budget that even Brexit preparation is going to cost more’.
Ian Blackford, SNP, called on the government to back SNP and Institute of Directors demands to introduce a small and medium-sized enterprise support service to help firms to map out and prepare their supply chains to deal with Brexit.
From the Labour benches, Ed Miliband said the choice that has been made since Lady Thatcher has been to put money into housing benefit and various subsidies including Help to Buy.He went on to say we have ‘missed the point’ that investing in housing is investing in an essential part of our infrastructure.
Karin Smyth and Alex Sobel, both Labour, raised issues around the use by NHS Trusts of wholly owned subsidiary companies set up so that the private companies in question can reclaim VAT. Ms Smyth described the Treasury and the Department of Health as being ‘unconcerned’ about the issue while Mr Sobel was disappointed that the chancellor had missed an opportunity to enable NHS Trusts to reclaim VAT. Sobel also called for hybrid cars to be made VAT exempt, criticising subsidy reductions for the development of hybrid and electric vehicles.
Kirsty Blackman, SNP, said that Scottish Police and Fire Services were still owed £175 million in VAT payment as a result of changes in the VAT treatment rules announced in last year’s Budget. While the government had ‘recognised that the system they had in place was unfair’ they had yet to return the money paid in previous years. She also lamented a missed opportunity to reduce VAT on bikes, arguing that the move would make them cheaper as well as being ‘a real statement of intent from the Government on reducing climate change’. Conservative Sir Robert Syms suggested this may not be possible under existing EU rules but that Brexit provided an opportunity to amend this. In response, Ms Blackman stated that it was possible to reduce VAT as a member of the EU but that zero rating good presented more of a problem.
DUP’s Sammy Wilson was disappointed that more progress has not been made on reducing VAT or air passenger duty.
Kirsty Blackman, SNP, said that the Chancellor’s Budget would not address the ‘economic catastrophe’ of Brexit and reemphasised the SNP’s support for Scottish independence. She said Scotland ‘did not vote for a Tory Government and we did not vote for Brexit’. She welcomed the Chancellor’s commitment to provide greater clarity on the fiscal regime for the oil and gas sector, saying that it could help to remove ‘unforeseen, sudden tax hikes like those made by previous Chancellors’. Angus MacNeil, also SNP, claimed that when the figures for what Scotland has lost are totalled up, agriculture VAT comes to £1.1 billion; and there is the £1.9 billion cut from 2010. That is £3 billion in total. “When we look over the Irish sea, we see Ireland with its seven per cent growth in the last year alone. Ireland’s economy has grown by £18 billion. The Irish are getting £4 billion more in tax. What is the difference between Scotland and Ireland? Ireland, which is independent, is £7 billion ahead of Scotland with the Tories in Westminster. If that is not a wake-up call, what is?”
From the Conservative benches, Andrew Bowie complained that the SNP’s decision not to match Tory plans to raise the threshold for the higher rate of income tax means that hard-working people in Scotland will be £1,000 worse off than their counterparts south of the border—£1,000 worse off for doing exactly the same job in the same country, he said. Stephen Kerr said the £200 million to be invested in rural broadband was to be funded by the national productivity investment fund, which means that Scotland will not get anything, something he deeply regrets. The UK Government must work with the Scottish Government to fix the issues over the highlands and islands exemption and allow the transfer of air passenger discount to Scotland in a workable format, said Drew Hendry. Hendry claimed the Chancellor’s Budget contained a veiled threat to allow for a dangerous increase in that tax, which would further hit Scottish travellers. Luke Graham said, on tax, where the SNP tax changes delivered £20 a year for the most vulnerable, ‘our Budget’ delivers £130 a year, which is £1,200 for the basic rate income taxpayer, helping people who need it most’.
Other measures and comments
- Sir Michael Fallon (Conservative) is worried that the current savings ratio, at 4.9 per cent of disposable income, is the lowest for 50 years, with a solution is to reduce the holding period and improve the tax treatment so that we have genuine share ownership.
- Jeremy Corbyn (Labour) is angry that, since 2010, 86 per cent of the cuts through tax and benefit measures have come from women.
- Sir Edward Leigh (Conservative) complained that by the end of the Parliament the Government will take 38 per cent out of the economy, which is exactly what Gordon Brown took out of the economy at the end of his Chancellorship.
- Dame Margaret Hodge (Labour) regretted that the government have not used the Budget to build on Parliament’s determination to have greater transparency in British tax havens.
- Anna McMorrin (Labour) was struck at the failure to make decarbonisation and clean growth absolutely central to the government’s economic plans.
- Marcus Jones (Conservative) welcomed the fact that ‘for probably the first time ever’ road tax was to be directly invested in roads as well as the continuing fuel duty freeze. These were points that won the endorsement of his colleague, Anne-Marie Trevelyan, later in the debate.
- Helen Goodman (Labour) asked where the dividend was from the Sanctions and Anti-Money Laundering Act 2018, which Labour supported the government in passing to increase the tax take from the money ‘stashed away in the Caribbean by the rich and powerful’.
Vote on Labour’s amendment
Labour proposed an amendment to resolution 1 (income tax) that income tax is charged for the tax year 2019-20 "provided that... the Chancellor of the Exchequer has, no later than 5 April 2019, laid before the House of Commons a distributional analysis of - (a) the effect of reducing the threshold for the additional rate to £80,000, and (b) the effect of introducing a supplementary rate of income tax, charged at a rate of 50%, above a threshold of £125,000." The amendment was defeated by 313 votes to 246.
Vote on resolution 5 - Basic rate limit and personal allowance for tax year 2019-20
The Liberal Democrats pressed this resolution – which sets the personal allowance at £12,500 and the higher rate threshold at £50,000, to the vote and were joined in the division lobby by 20 Labour MPs. The resolution was nevertheless passed by 314 votes to 31.
Vote on resolution 79 - Minor amendments in consequence of EU withdrawal
The opposition parties opposed this resolution which confers upon the Treasury a range of powers in relation to tax legislation relating to Brexit. These include the power to make provision for the purpose of maintaining the effect of any relevant tax legislation on Brexit, provision for the purposes of any relevant tax, in connection with any provision made by regulations under section 8 of the European Union (Withdrawal) Act 2018, and – intriguingly – provision to permit the disclosure of information to HMRC Commissioners by other public authorities and by the Commissioners to persons outside the United Kingdom. This resolution was passed by 312 votes to 295.
In total 80 resolutions were passed. They can be read here.
Budget at a glance
‘Giveaway Budget’ cuts income tax, but taxes big tech
Philip Hammond delivered his third Budget as Chancellor on Monday. Over the six year window covered in the Red Book, policy decisions taken in the Budget amount to a net giveaway of £5 billion in tax cuts (mostly income tax and fuel duty) and £98 billion in spending increases (mostly NHS spending). The Budget’s contents have been reported extensively elsewhere but, just to recap, the main tax measures were:
- Income tax personal allowance will increase in April 2019 to £12,500, and higher rate threshold to £50,000 (with commensurate increase in the NI upper earnings limit)
- New off-payroll rules (IR35) extended to private sector
- Shared occupancy test for ‘rent-a-room’ relief dropped
- Employment allowance to be restricted to smaller businesses (those with an employer NICs bill below £100,000 in the previous tax year)
- Treatment of voluntary tax returns to be put on a statutory footing
- Increase the Annual Investment Allowance from £200,000 to £1 million for two years
- New structures and buildings allowance (SBA) (2% capital allowance)
- Capital allowances special rate reduction from 8% to 6%
- Minimum qualifying period for Entrepreneurs’ Relief extended to 24 months
- Digital Services Tax (DST) - from April 2020, large social media platforms, search engines and online marketplaces will pay a 2% tax on revenues they earn which are linked to UK users
- Restriction on use of corporate capital losses for tax purposes
- Offshore entities to be taxed on income from intangible property held in low-tax jurisdictions
- Private residence relief final period exemption reduced to 9 months
- Lettings relief limited to properties where the owner is in shared occupancy with the tenant
- First-time buyers' relief extended to those purchasing shared equity homes
- Business rates cut by a third for two years for small retail businesses
- VAT registration threshold frozen
- Prepayments for goods and services brought into scope of VAT where customers have failed to collect but not received a refund
- Government will introduce Carbon Emissions Tax if UK leaves the EU Emissions Trading Scheme
- A new tax on production and import of plastic packaging which does not contain 30% recycled plastic
- Fuel duty frozen
- Short-haul rates of Air Passenger Duty frozen. Air Passenger Duty to be indexed in line with inflation
Other taxes and announcements
- Work allowances for universal credit to be increased by £1.7 billion.
- HMRC to get preferential creditor status for taxes collected and held by businesses on behalf of other taxpayers
- HMRC penalties reforms delayed until April 2021 at the earliest
It is worth remembering that some tax rates and thresholds are different in Scotland. The Scottish government's Finance Secretary Derek Mackay will set out his plan for Scottish taxpayers on 12 December.
Additional reporting by Chris Young, Scotland External Relations Officer, CIOT