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Conservative Party election manifesto tax plans

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The Conservative party published its election manifesto on 18 May, giving little detail on tax plans beyond what has been announced previously and those Finance Bill measures we expect to see reintroduced early in the next Parliament ( Among those receiving a specific mention are:

  • increasing the personal allowance to £12,500 and the higher rate to £50,000 by 2020;
  • reducing corporation tax to 17% by 2020;
  • devolution of corporation tax powers to Northern Ireland, subject to the executive demonstrating fiscal stability;
  • tougher regulation of tax advisory firms (penalties for enablers);
  • further measures to reduce online fraud in VAT (fulfilment houses/new VAT penalties); and
  • a more proactive approach to transparency and misuse of trusts (trust register).

The manifesto contains promises to:

  • replace the pensions ‘triple lock’ in 2020 with a ‘double lock’; namely, rising in line with the higher of earnings or inflation, but not tied to a 2.5% increase;
  • simplify the tax system;
  • make sure people working in the ‘gig’ economy are properly protected, drawing upon the findings of the forthcoming Taylor Report; and
  • promote R&D investment to meet the current OECD average of 2.4% of GDP within ten years (with a longer term goal of 3%).

A variety of checks on executive pay and corporate governance would be introduced, including:

  • legislation to make executive pay packages subject to strict annual votes by shareholders;
  • a requirement for listed companies to publish the ratio of executive pay to broader UK workforce pay;
  • a requirement for companies to explain pay policies better, particularly complex incentive schemes;
  • an examination of the use of share buybacks, to ensure these cannot be used artificially to hit performance targets and inflate executive pay; and
  • updated rules on mergers and takeovers to deter asset stripping or tax avoidance, by requiring bidders to state their intentions from the outset, such that all promises and undertakings made in the course of takeover bids can be legally enforced afterwards.

Dominic Stuttaford, tax partner at Norton Rose Fulbright, described the manifesto as ‘unsurprisingly short on detail’. If re-elected on 8 June, a Conservative government will, he observed, ‘have the freedom both to raise taxes and restructure the tax system to meet the challenges ahead’. Stuttaford welcomed commitments to reduce corporation tax and simplify the tax system, adding that any such simplification should include both small and large businesses.

The Institute for Fiscal Studies commented that abandoning the pensions ‘triple lock’ and moving to a ‘double lock’ will do very little to relieve pressure on the public finances, as both average earnings and inflation are unlikely to fall below 2.5% over the long term.

On the proposal to require listed companies to publish pay ratios, Graeme Standen, executive remuneration expert at Pinsent Masons, sees this as a ‘refinement’ of a recent green paper proposal for reporting the ratio of CEO pay to that of the median worker.

‘Given that quoted companies often have large non-UK workforces of very varied composition, and that the relevant political and social sensitivities are UK-specific,’ Standen said, it looks ‘sensible and practical’ to focus on broader UK workforce pay.