A Q&A with HMRC: deal or no deal?

A Q&A with HMRC: deal or no deal?

Politicians are often slippery when it comes to answering questions, especially so when the subject addressed is murky. It doesn’t get much murkier than the IR35 reform, as announced in Budget 2018, and its draconian sibling the 2019 loan charge.

However, the game of Brexit deal-or-no-deal currently being played out across all major media outlets has shaken things up a little.

HMRC's Mel Stride is enjoying a break from fending off pointed questions about his usual antics (ruining the lives of contractors with an uncompromising approach to historically legal tax schemes) and is instead being asked to comment on how working people will be affected should we leave the EU with no deal.

Yet again though, the Treasury is skirting the truth when it comes to facing questions with unpopular answers.

So, here’s this week’s roundup of HMRC’s most evasive takes.

Will HMRC lower corporation tax after Brexit?

David Simpson, Shadow DUP Spokesperson (Environment, Food and Rural Affairs), Shadow DUP Spokesperson (Business, Energy and Industrial Strategy), asks:
To ask the Chancellor of the Exchequer, whether he plans to lower corporation tax after the UK leaves the EU.

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:
The government is committed to ensuring the UK remains competitive and an attractive destination to set up and grow a business.

Since 2010, the government has cut the rate of corporation tax from 28% to 19% today. The government has legislated to reduce the corporation tax rate further to 17% in April 2020. This delivers the government’s ambition to have the lowest overall rate in the G20.

As with all aspects of the tax system, the government keeps the UK corporation tax rate under review. Any decisions on future policy would be considered as part of the Budget process, in the context of the wider public finances.

The government also remains committed to commence the power for the Northern Ireland Assembly to set a Northern Ireland rate of corporation tax, as set out in the Stormont House Agreement, once a restored Northern Ireland Executive demonstrates its finances are on a sustainable footing.

What does it really mean?
This is probably the straightest answer we’ve had so far on this roundup – but he still doesn’t say ‘yes’.

The 2% tax reduction he refers to was already arranged no matter how Brexit played out. Mr. Stride says it himself: these plans were part of another entirely different ambition concerning being competitive within the G20.

Will this 2% reduction be enough to compensate in the event of a no-deal Brexit? Probably not. Saving 2% on tax won’t make up for the loss of EU links and definitely won’t be persuasive enough to keep international companies on English soil should we leave the single market, thus forcing the UK to face the very real prospect of job losses into the thousands.

Also, Mr. Simpson’s shoes must be squeaky clean after that last-ditch bootlicking.

Would HMRC consider raising taxes on global corporations to the benefit of working families?

John Hayes, Conservative, South Holland and The Deepings, asks:
To ask the Chancellor of the Exchequer, if he will make an assessment of the potential merits of increasing taxes on global corporations and using any additional revenue raised to the public purse to reduce taxes for families.

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:
Since 2010, this government has taken unprecedented action to ensure that large multinationals pay their fair share of tax in the UK. For example, at Budget 2018, the Chancellor announced the introduction of a new Digital Services Tax (DST) from April 2020. This will raise around £1.5bn across four years.

At the same time, the government remains committed to keeping taxes low for working people. A typical basic rate taxpayer will pay £1,200 less in tax in 2019-20 than in 2010, and we’ve announced plans to freeze fuel duty for the ninth year in a row.

The government will continue to keep all tax policy under review.

What does it really mean?
It’s pretty much common knowledge, after multiple mainstream tax scandals, that huge international corporations get huge tax cuts (looking at you, Starbucks). Mr. Stride even has his very own stake in a firm linked to Amazon, which of course is definitely not a conflict of interest.

The supposed ‘unprecedented action’ has also taken a whole 10 years to roll out, if the timeline given is accurate. It’s a shame that the same generous adjustment time isn’t applied to tax changes for smaller businesses – exhibit A being when HMRC was forced to push Making Tax Digital back by a year as a result of a House of Lords report called Treating Small Businesses Fairly.

That aside, how does tax relief for working people fit in with keeping the big multinationals – and all the jobs they guarantee - in the UK? Unfortunately one or the other will have to suffer and it’ll most likely be the working man that foots the bill.

Takeaways for the week

The ambiguity surrounding Brexit makes it very difficult to comment on any aspect of the UK’s future but either way, HMRC will play a part in helping to keep the UK an attractive base for large businesses to stay. No mean feat in the face of leaving sans-deal.

We just hope that it doesn’t result in even more pressure being put on the likes of the loan charge for easy revenue, especially following last week’s win for contractors across the country.