Autumn Statement: What the North West business community wants to see

With George Osborne set to deliver his Autumn Statement today (November 25), we spoke to North West business leaders to get an idea of what the region wants to see in the Chancellor’s second statement since the Conservative Government came to power in May.

Tony Medcalf, the head of tax at Preston-headquartered accountancy firm Moore and Smalley, said he doesn’t see much scope for major tax announcements.

“Instead, I expect the chancellor will use this occasion to set out the other ways he intends to grow the economy,” he explained, “focusing on matters such as boosting exports, devolution, the Northern Powerhouse, and so on.

“The focus will be on government spending, so we may hear some announcements on road and rail projects, as well as areas where the government wants to save money.”

“Helping middle earners was central to many of the Conservatives’ election pledges”

Tony continued: “If he does change tax rates, he may announce something around reducing National Insurance Contributions for people on certain incomes. This would be something that would be aimed at softening the blow of removing working tax credits.

“Income tax seems fairly set for the time being, there’s no scope for doing anything with VAT and he’s already made a number of big announcements on corporate tax rates and investment allowances.

“There’s continued calls from some within the Tory party to reduce the top rate of income tax to 40p, but it would be a very brave chancellor to do that in the current climate, especially with the planned cuts to tax credits.

“The opposition has called for the chancellor to shelve income tax cuts for people in the 40p tax bracket and abandon the planned rise in the threshold for higher rate tax payers to £50,000. However, I think it’s unlikely the chancellor will put the burden on people in this bracket as helping middle earners was central to many of the Conservatives’ election pledges.”

Jayne O’Boyle, a tax manager at Accrington firm Haworths Chartered Accountants, outlined how she believes changes in the statement could put pressure on higher earners.

She said: “It may be revealed that higher rate tax brackets will be reduced so that higher earners will fall into the 40% tax bracket, and if this does happen, I highly doubt this will be viewed favourably as the vast majority of this sector I would assume voted for the Tory Government.

“If child benefit ceased, this income could be redirected instead to pay an enhanced child tax credit to those on qualifying levels of income”

Deviating from the earnings bands that have already been proposed for the life of the current Tory parliament, she said, could lead to a loss of faith for many voters.

“Instead of tinkering with the tax system through benefit and tax credit changes,” Jayne continued. “I think a more decisive approach should be used to target certain groups to redirect income. For example, if child benefit ceased, this income could be redirected instead to pay an enhanced child tax credit to those on qualifying levels of income.”

Speaking further, Jayne shared her thoughts on possible IR35 changes that could have a significant impact on UK contractors.

“Contractors will be less inclined to take up assignments any distance from home if the rules proposed suggest they cannot claim the costs of travel to get there”

She explained: “There has been a constant hype around the use of personal service companies to avoid tax and the HMRC introduced certain rules found in IR35 which have proved either unworkable or difficult to enforce.

“A consultation into the working rules under such companies is ongoing, and the majority of these companies operate under short term contracts providing services to fill the knowledge and skills gaps required in our country.

“Yet the consultation is suggesting a time limit, as short as one month, for which the individual’s services are required and then should trigger employment status. Many companies will need these contractors for more than one month and this proposal will prove costly and unfeasible, potentially deterring contractors from accepting positions and severely hampering the flexibility of the workforce.

“In addition, HMRC is also reviewing the whole area of travel and subsistence expenses claimed for business purposes. Again, contractors will be less inclined to take up assignments any distance from home if the rules proposed suggest they cannot claim the costs of travel to get there. Overall, I predict there will be some resistance if this is announced.

“It is unacceptable for businesses to wait years for the resolution of appeals whilst also being subject to huge business rates over payments”

“In the March Budget the Chancellor already announced the introduction of the dividend tax from next April to increase ‘tax take’ from the owners of companies. This will be an additional 7.5% tax liability which already alleviates the gap caused by the lack of Employers NIC paid by personal service companies.”

Adam Burke, a Manchester-based director of rating for commercial real estate firm Colliers International, said the Government should provide the Valuation Office Agency (VOA) with “a clear target that will ensure all appeals are resolved by the time the 2017 Rating List goes live”.

Adam continued: “The VOA has now amassed a record 255k outstanding rating appeals, which in part was caused by the cut off in appeals announced in last year’s Autumn Statement.

“It is unacceptable for businesses to wait years for the resolution of appeals whilst also being subject to huge business rates over payments.”

Giles Beswick, the director of Manchester- and London-based property developer Select Property Group, said maintaining the momentum of inward investment into the Northern Powerhouse will be one of the Government’s biggest challenges.

“The international investment and appetite to transform this region into a global centre for economic success is there for the taking.”

“Around 10k new private rented sector units are planned in Manchester in the next few years,” he said, “fuelled by institutional investment and a demand to acquire rented real estate in a city with one of the youngest demographics in the UK.

“Crucially, the prospect of strong economic growth and the impact this will have on capital appreciation and yields is driving interest in Manchester from the global investor community.”

Giles explained that while investors have been quick to realise the growth potential of buying in Manchester, the growth actually came while the Government’s latest Northern Powerhouse plans were still being mapped out.

He went on: “Therefore, there is now more pressure than ever on the Chancellor to ensure that the ever-increasing international confidence in the region, exemplified by recent high-profile commitment of the Chinese Government and business leaders, is converted into the outstanding real estate and infrastructure the North needs if we are to truly rebalance the UK’s economical map.

“In 2012-14, cities that make up the Northern Powerhouse rebounded for the first time since the global economic crisis, with more growth inevitable. The international investment and appetite to transform this region into a global centre for economic success is there for the taking.

“Mr Osborne’s responsibility to ensure his vision of a Northern Powerhouse becomes a reality over the next decade represents a defining moment for not just his political legacy, but the futures of cities such as Manchester, Liverpool, Leeds and Sheffield.”

What do you want to see addressed in the Autumn Statement? Let us know in the comments or tweet to us @BdailyNorthWest

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