Asset Finance and the Autumn Budget22/11/2017
GDP growth and business investment forecasts have been downgraded from those of March, whilst inflation has increased to 3%, but is forecast to fall back down to the target 2% rate. Borrowing for 2017-18 is expected to be lower than previously forecast. Given the background, a generally balanced budget was expected; however, supporting papers indicate that a loosening of fiscal policy. The Budget deficit will now decline more slowly, although borrowing will decline as a percentage of GDP.
The major focus for the Chancellor was to emphasise stamp duty cuts for first time house buyers, along with increased money for the NHS and for new technology/ infrastructure, such as 5G, fibre broadband, electric car recharging and driverless vehicles. In addition, he referenced plans to increase house building, targeting 300,000 net new homes per year, and easing transition onto Universal Credit.
The consultations on the tax treatment of leasing are now scheduled to be released on 1 December. One will cover the legislative changes required to ensure “tax rules for leased plant and machinery continue to work as they do currently” following the introduction of IFRS 16 in 2019. The second consultation will “evaluate options for the corporation tax treatment of lease payments under the new corporate interest restriction rules”.
Unsurprisingly diesel features in the Budget. The first year VED rate for new diesel cars will be increased by one band from 1 April 2018, except for cars certified as meeting the Real Driving Emissions (RDE2) standard. Similarly the company car benefit in kind supplement will be increased from 3% to 4% for diesel cars, although this supplement will be removed entirely for cars whose NOx emissions are certified as meeting the RDE2 standard. The Budget documents also confirm that car VED and company car benefits in kind will continue to be assessed by reference to NEDC figures until April 2020, before moving to WLTP.
Meanwhile HGV VED and levy rates will be frozen for 2018-19, with the call for evidence on updating the HGV road user levy, originally announced in March, now rescheduled to Autumn 2017.
Hints on possible future tax rises, to offset some of the extra expenditure announced today, came in comments on a possible withholding tax on royalties paid (particularly by digital companies) to low tax jurisdictions, tax on single-use plastics waste and a consultation on off-payroll working (IR35 etc) for the private sector, possibly to bring this into line with the changes from April 2017 in the public sector.
Overall there may be no major policy announcements affecting asset finance, but those involved with cars will need to study the changes for diesels.