24 June 2016
Sitting in the office considering the aftermath of the Brexit vote and reading the initial reactions of commentators does not make for a comfortable end to the week. The UK’s decision to leave the EU will have significant implications on our economy; however history has taught us that the UK is adaptable when confronted with new challenges.
With twin concerns of economic downturn and political turmoil, there’s no doubt that for some months to come the UK’s trading position will be worse than it was in the first part of 2016. To add to that, David Cameron’s signalled resignation will bring a lack of dynamic political leadership for a few months.
Looking at direct taxes in the UK, I think that we’ll see the current Finance Bill go to Royal Assent, so the worries expressed by some that tax relaxations, such as the reduction in Capital Gains Tax rates, will not be in place to apply to transactions already undertaken since 5 April 2016 will not crystallise. That at least will bring a small measure of certainty.
Thereafter the future becomes much cloudier, with the Tory leadership election looming large. If this does not become too bloody, then a new Conservative Government may emerge which is able to act coherently in the face of the ongoing economic challenges based on the mandate provided by the last election. In which case, we may see a new Chancellor who needs to tackle the country’s difficulties by further reducing public spending and putting a stay on any further tax breaks. It’s likely that the scheduled tax increases on residential landlords will still go ahead, but a new Chancellor may find further sectors to squeeze.
If the leadership contest becomes divisive, we may see the Conservative majority in Parliament implode and a General Election later this year or early next year. A fresh mandate could bring in a Government of a different hue from the current one and one that will want less austerity with the consequent need to raise more tax.
In summary, the direct tax climate is set to get harsher over the next few years and only once the initial economic threats have been met and a settlement with Europe negotiated will the Government be in a position to ease the taxpayers’ burden.