Posted by James Pearson on 19 Jun 2017
Election Result Increases Tax Uncertainty
The 2017 snap General Election has resulted in a hung parliament: The Prime Minister, having gambled with her majority position, is left trying to form a minority Government, ostensibly with the assistance of the DUP. It is not clear how this election result will affect the existing uncertainty over the proposed tax changes that were dropped from the 2017 Finance Act, and the wider economic arena.
When the Finance Bill 2017 was slashed by two-thirds in order to be pushed through before this election, it was expected that a Finance (No 2) Bill 2017 would be introduced by the next government. This Bill would include all the dropped provisions applying from the same intended dates. However, it wasn’t made clear (and still isn’t certain) that this will be the case.
Whilst the Conservatives will try to carry on with implementing their proposed changes, many taxpayers are still left in limbo regarding their current UK tax position, at least until the next Finance Bill is published. A second election, if it arises, could further extend this period of uncertainty, particularly in light of the widely differing tax proposals from the different parties.
The DUP, like the Conservatives, are supporters of cuts to corporation tax, which should help to keep the reduction in the rate to 17% from April 2020. However, proposals such as Making Tax Digital, reductions to dividend and pension allowances, and the deemed domicile provisions may need the support of other parties to pass.
Beyond tax, the UK’s path on Brexit is far from clear: this result could mean a softening from the out-and-out “Hard Brexit” approach that has been the chosen route to date, but given that both the Conservatives and Labour increased their overall vote share whilst supporting Brexit, any change away from Brexit is unlikely.
This election was called under the pretext of providing Theresa May with a mandate for Hard Brexit and an increased majority to provide a strong and stable government for the country. The final result is anything but.
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