On Monday 26 September, HM Treasury announced that the Chancellor of the Exchequer, the Rt Hon Kwasi Kwarteng MP:
would ‘set out his medium-term fiscal plan on 23 November’;
had ‘requested that the OBR sets out a full forecast alongside the fiscal plan, on 23 November’, and
confirmed ‘there will be a Budget in the Spring’.
This is a disappointing development from a timetabling point of view. In another era, back in December 2017, the chancellor-before-the-chancellor-before-the-chancellor-before-the-chancellor-before-the-chancellor, Philip Hammond, announced a new Budget timetable that would see a single Budget presented in the Autumn each year, and a separate fiscal statement being made in the Spring. The logical justification for the change was that a ‘single Autumn Budget will mean tax changes are announced well in advance of the start of the tax year in which they will take effect’.
The timing matters. Tax announcements need to be legislated. Tax legislation is normally contained in a Finance Bill. A Finance Bill is normally published the week after a Budget. A Finance Bill published in the Autumn, should expect to receive royal assent in mid-to-late March, before 1 April and the start of the next financial year. By contrast, a Finance Bill published in the Spring probably wouldn’t normally receive royal assent until mid-July, well after the start of the financial year to which some of its provisions may apply.
That in turn has practical implications because businesses cannot assume a proposed change, even those announced by the chancellor, will take effect until the relevant Finance Bill is ‘substantively enacted’; that is, at its third reading in the House of Commons when it is sent to the House of Lords. To illustrate the problem: if we don’t get a Finance Bill until Spring 2023, and it isn’t ‘substantively enacted’ until, say, late June or early July 2023, companies have to assume that the main rate of corporation tax will rise to 25% in April next year. That assumption would distort their financial statement reports by artificially inflating the value of their deferred tax assets and liabilities.
In addition, and perhaps even more importantly, rigour and regularity in the process matters. It promotes certainty, it engenders stability and allows taxpayers to have confidence that they (at least) understand a government’s fiscal direction of travel and make appropriate plans for it. There are no alarms and no surprises. Of course ‘events’ will intervene, but having some sense of a timetable, a structure, a process that facilitates proper consultation, engagement and, above all, Parliamentary scrutiny is critically important.
So the question arises, will there be a Finance Bill published this Autumn? Currently, the answer is we simply do not know. And that is a problem.
On Monday 26 September, HM Treasury announced that the Chancellor of the Exchequer, the Rt Hon Kwasi Kwarteng MP:
would ‘set out his medium-term fiscal plan on 23 November’;
had ‘requested that the OBR sets out a full forecast alongside the fiscal plan, on 23 November’, and
confirmed ‘there will be a Budget in the Spring’.
This is a disappointing development from a timetabling point of view. In another era, back in December 2017, the chancellor-before-the-chancellor-before-the-chancellor-before-the-chancellor-before-the-chancellor, Philip Hammond, announced a new Budget timetable that would see a single Budget presented in the Autumn each year, and a separate fiscal statement being made in the Spring. The logical justification for the change was that a ‘single Autumn Budget will mean tax changes are announced well in advance of the start of the tax year in which they will take effect’.
The timing matters. Tax announcements need to be legislated. Tax legislation is normally contained in a Finance Bill. A Finance Bill is normally published the week after a Budget. A Finance Bill published in the Autumn, should expect to receive royal assent in mid-to-late March, before 1 April and the start of the next financial year. By contrast, a Finance Bill published in the Spring probably wouldn’t normally receive royal assent until mid-July, well after the start of the financial year to which some of its provisions may apply.
That in turn has practical implications because businesses cannot assume a proposed change, even those announced by the chancellor, will take effect until the relevant Finance Bill is ‘substantively enacted’; that is, at its third reading in the House of Commons when it is sent to the House of Lords. To illustrate the problem: if we don’t get a Finance Bill until Spring 2023, and it isn’t ‘substantively enacted’ until, say, late June or early July 2023, companies have to assume that the main rate of corporation tax will rise to 25% in April next year. That assumption would distort their financial statement reports by artificially inflating the value of their deferred tax assets and liabilities.
In addition, and perhaps even more importantly, rigour and regularity in the process matters. It promotes certainty, it engenders stability and allows taxpayers to have confidence that they (at least) understand a government’s fiscal direction of travel and make appropriate plans for it. There are no alarms and no surprises. Of course ‘events’ will intervene, but having some sense of a timetable, a structure, a process that facilitates proper consultation, engagement and, above all, Parliamentary scrutiny is critically important.
So the question arises, will there be a Finance Bill published this Autumn? Currently, the answer is we simply do not know. And that is a problem.
.tmb-editorspic.jpg?sfvrsn=df04ab27_1)
