Over the last few months, we’ve seen a Conservative government clobbering not just small businesses in general but also, I suspect, many of its natural supporters amongst the self-employed - not just with MTD but also with the (quickly abandoned) NIC hike and, most disastrously for many (yes, including me), the increase in the amount to be paid under the flat-rate VAT scheme. For a lot of consultants, the loss of several grand a year due to the latter change is quite serious, yet it was presented in certain quarters as simply restoring fairness as some people were gaming the system. That’s all well and good, but HMRC used to call up self-employed people to alert them to the scheme, so it is a bit rich of them to then imply that those affected were somehow or other ‘at it’ and aggressively avoiding tax. Those under the previous flat rate scheme were simply playing within well-established rules and if those rules were wrong (they were hardly buried away in the small print like some of the scams used by various big names) that’s the fault of the government/HMRC, not of the self-employed.
The “good” news however, is that it appears that we, the self-employed, are going to get some other benefits flung our way to make up for the loss of this money. Some apparatchik who used to work for Tony Blair is advising the government on this and it seems that their next wheeze will be to offer self-employed people maternity and paternity leave. As an example of the detachment of the political classes this takes some beating. I don’t know many small businesswomen and men who could take months off on paternity/maternity pay without their business going pechos arriba.
The increase in the NIC tax was promptly ditched once it became clear that it was against not just the spirit but, more importantly, the actual letter of the Conservative party’s general election manifesto. This presents a problem for a government that seems determined to keep increasing the tax take, partly to help smooth over the next few years while Brexit causes fluctuations to the economy (and everyone in the media declares that each new setback or success spells doom and disaster (Guardian/Independent) or heralding a bright new dawn (Daily Mail/Telegraph).
The real problem though is that because they government can’t increase direct taxes (that pesky manifesto commitment), they’ll need to fall back on sneaky stealth taxes. We saw this with the Lord Chancellor’s failed attempt to introduce a new probate tax, fortunately, now looking certain not to happen. However, while she was guilty of trying to exceed her powers, I can’t believe (in the same way that I can’t believe that the Prime Minister didn’t know about the NIC increase) that other senior figures were not aware of what was happening, so surely this was simply another attempt to increase the government’s tax revenues. The fact that it failed doesn’t mean they’ll stop trying. Next, expect it to cost even more to buy/use diesel cars, plus lots of other things buried on page 97 of the next few budgets. Watch, as I believe the expression is, this space…
Alastair Blair, thePotentMix