Paul Falvey, Tax Partner at BDO, looks at his BDO predictions and wish list for tomorrow’s Autumn Budget 2017.


As Phillip Hammond gets ready for the Budget, I expect few giveaways or surprises as the Chancellor builds a Brexit war chest to prepare for the uncertainty to come. It’s fair to say that Hammond’s hands are not only tied by Brexit uncertainty, they are handcuffed and manacled by low growth forecasts and a wafer thin majority in Parliament too.

Despite having limited funds available, we’re predicting a number of measures to be announced in the Budget including:

A bid to woo younger voters and a ‘tax on age’?

We expect a raft of measures aimed at helping younger voters and closing the inter-generational gap. At its most costly for the Treasury, this could include a possible cut in National Insurance rates for younger workers but is more likely to mean pension auto-enrolment extended to workers below the age of 22 and more concessions on student loans.

With Labour performing well with younger voters at the last election, the Chancellor will undoubtedly see the Budget as an opportunity to redress the balance. However, with no scope for overall tax cuts, the Chancellor will need to find the money from somewhere else; possibly from a reduction in tax relief for older savers. The Chancellor must be careful here – mishandle this and he could be accused of creating a “tax on age”.

Levelling the playing field for off-payroll workers

In the last Budget, the Chancellor introduced new rules that dictate how much tax is paid by ‘off-payroll workers’, or contractors, working in the public sector. The old rules required the contractor to operate PAYE but they frequently didn’t do this. New rules were introduced in April to put the onus on the local authority ‘employer’ to operate PAYE. We now expect the rules to be extended to cover private sector organisations as an anti-avoidance measure.

Since the new off-payroll rules only affected the public sector there have been warnings of an IT contractor exodus from Whitehall, with contractors preferring to work in the private sector for tax purposes. We expect the Chancellor to even up the playing field and extend the rules to private sector companies too to increase tax take, correct an imbalance in employment tax legislation and avoid a brain-drain from the public sector.

Help for the high street

We expect to see some help offered to the UK’s beleaguered high street. The switching of the measure from RPI (at 3.9%) to the lower CPI (2.9%) announced in Spring 2017 could be brought forward to 2018. There could also be measures to create more certainty and fairness by legislating for more frequent valuations every three years. Britain’s high street has been struggling for some time, with stagnant wage growth limiting spending power while online retailers have attracted what disposable income there is. We expect the Chancellor to give the high street some greater certainty and fairness by making adjustments to business rates. In the longer term, I wouldn’t be surprised to see the Government introduce some form of low tax on the ‘digital real estate’ of large online retailers.

The BDO Budget wish list

The Government must take a long-term view of the UK economy and put plans in place now to build a sustainable and balanced post-Brexit trading environment. It is crucial we don’t lose sight of the domestic business agenda during EU negotiations. To build this ‘new economy’ we would like to see the Chancellor focus on a simpler and consistent tax system, tackle the shortage of patient capital for innovative scale-ups and bolster resources for HMRC. The sort of things we’d like to see in the Budget are:

A tax simplification road map

The complexity of the UK’s tax code is one of the major obstacles of growth. Hammond has already made several u-turns and confusing changes in policy direction on simplification measures – most recently when he delayed the abolition of Class 2 NIC for another year. He has talked about moving to a new consultation cycle on tax legislation, which is welcomed but it won’t speed up simplification if the Chancellor keeps delaying decisions on the changes needed. We want to see the Chancellor announce a tax simplification road map – similar to the business tax road map introduced in 2016 – which starts after Brexit negotiations have finalised and spans the next decade to give businesses some clarity for the future. We would also like to see the Government take bold steps and agree a moratorium on all new business tax policies that do not simplify the system until 2020 or until the Brexit negotiations are finished (which ever comes first).

Tackling the shortage of patient capital

The Government has promised to announce a series of measures in the upcoming Budget to tackle the shortage of long-term investment, known as ‘patient capital’, in the UK’s most innovative companies. But despite this, there have been rumours that Enterprise Investment Scheme (EIS) relief could be significantly reduced and even withdrawn for lower risk or asset backed investments.

EIS has been hugely successful with more than £14bn invested in over 24,500 companies since its launch. We would like to see the EIS maintained or, if that is not possible, at least for any tightening of the rules kept to a minimum. One option would be to maintain the 30% relief for businesses advancing tech IP and reducing it to 20% for other businesses. Another option could be to increase the required holding period for EIS from three to five years to align with the patient capital policy objective. The UK is a hotbed of innovation and technology yet many scale-ups find it difficult to get the funding to break through to become bigger businesses. UK policy makers are often asking where the UK Google or the UK Facebook is. The answer must be to have a system of incentivised investment in our UK talent.

More resources for HMRC

Last month, Brexit Secretary, David Davis revealed that HMRC will need an extra 5,000 staff to work on new custom arrangements after Brexit – a number which BDO calculates will increase the HMRC wage bill by 8%, which is an additional £200m a year. As well as Brexit, HMRC will require continued investment to help combat tax evasion. HMRC resources will be stretched paper thin in the years ahead. In order to ensure that post-Brexit trade is as seamless as possible, HMRC must be given the resources to support British businesses.


Paul Falvey is Tax Partner at BDO in Bristol.

“The Government must take a long-term view of the UK economy and put plans in place now to build a sustainable and balanced post-Brexit trading environment.”

Paul Falvey, Tax Partner, BDO Bristol

Autumn Budget 2017

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