26/04/17

UK: May shelves tax raid on investors and non‑doms

A tax raid on dividend incomes paid to hundreds of thousands of pensioners has been shelved as the government drops a series of controversial measures before the election, reports The Times.

Legislation to force millions of business owners and the self-employed to file multiple tax returns each year under plans to “make tax digital” was another casualty yesterday of the decision to call a snap election.

Tough new rules for non-doms were also removed from the Finance Bill, leading to accusations that the Conservatives were breaking their promise to crack down on tax avoidance.

Ministers said that the measures were removed to create the consensus required to pass the legislation before the government ran out of parliamentary time. Treasury officials said that there was no guarantee that the policies would be implemented after the election because it would depend on who formed the government.

Sources close to Philip Hammond, the chancellor, indicated that the Tories would press ahead with the plans if they were re-elected but experts said that any policies removed from the Finance Bill could, at the very least, suffer further delays even if the Conservatives remained determined to legislate.

The plans to cut the annual amount that can be earned from share dividends from £5,000 to £2,000 before paying tax was the government’s biggest revenue-raising policy in this year’s budget, set to generate almost £1 billion extra tax a year by 2020.

More than 400,000 people aged over 65 would have been affected, losing an average of £315 each. The proposal upset many older savers who have turned to the stock market for income since interest rates plummeted after the financial crisis.

The decision to drop plans to make small businesses file tax returns more regularly online is expected to delay the implementation of the policy by at least a year. The plans have faced widespread opposition from taxpayers, business groups and politicians of all parties. George Osborne announced the plans when he was chancellor in 2015, in a move that could raise £2 billion a year.

Another policy dropped was the reform of tax rules applying to non-doms, including a plan to charge inheritance tax on UK residential property held in offshore entities.

The Liberal Democrats accused the government of reneging on promises to tackle tax avoiders. John Pugh, the Lib Dem MP for Southport, said: “It seems promises made after the Panama Paper leaks were nothing but hot air.

“This makes a mockery of Theresa May’s claim to be delivering for the many not the few. The ones who will benefit most are wealthy Tory donors.”

The move also upset some accountants who said it increased uncertainty at a time when the country most needed to encourage investment.

The sugar tax on soft drinks, also contained in the bill, survived the cull.

A source close to Mr Hammond said: “These provisions make a significant contribution to the public finances, and the government will legislate for the remaining provisions at the earliest opportunity at the start of the new parliament.”