Our expert on all leasing matters budgetary, accounting and taxing, George Tonks, Partner at Invigors EMEAA LLP, gives his first impressions of the Budget as follows:
The Chancellor delivered an upbeat, but rather undramatic Budget speech (his first and last March Budget, as he will revert to an Autumn Budget in future). The overall tone was positive, with the economy faring better than forecast in the previous Autumn Statement and conveyed a message of being in control of the process of getting public finances back in shape.
However, for many asset finance companies, the most important part of the Budget was not covered by this speech. After the Chancellor sat down, HMRC announced that it will consult over the summer on legislative changes required “to maintain the current system of lease taxation by making legislative changes which enable the rules to continue to work as intended.” Taking this at face value, having considered the various alternative ways of taxing equipment leasing transactions, the Government has concluded to keep the current principles, rather than introducing any dramatic change.
Various options had been set out in a discussion paper issued in August 2016; responses were mixed in their support for each of those options. Some participants, particularly those involved in certain types of car leasing, will be disappointed at this conclusion. But we will need to look at how the consultation progresses and whether any additional changes are included in the final arrangements.
Simon Goldie of the Finance & Leasing Association said much the same, confirming that, tucked away in one of the supporting documents for the Budget was the announcement that the Government has decided to maintain the current system of lease taxation, suitably amended to take account of the new international lease accounting standard. The FLA has confirmed with HMRC that this would be a variant of “option one” in the consultation paper they published last year on lease taxation and would therefore maintain capital allowances for the lessor. The FLA will be discussing the detail further with HMRC in advance of a further consultation now expected from the Government in the summer.
From the Challenger banks, the first to comment was Carl D’Ammassa, Group Managing Director – Business Finance at Aldermore, who said:
For many of our small and medium-sized business clients, the current economic uncertainty has been exacerbated by the thorny issue of business rates. With this in mind, we welcome the Government’s announcement of £435 million in further support for businesses facing significant increases in bills from the English business rates system. This will go some way to allaying the anxieties of those most impacted.
Car rental companies have been more unsettled of late after the recent 400pct VED hike. Reacting to the Budget, BVRLA Chief Executive Gerry Keaney said, “Mr Hammond’s first and last Spring Budget was the perfect opportunity to create a fairer, simpler tax system that incentivises the uptake of ultra-low emission vehicles. We are now left with company car tax and VED regimes that do little to support the Government’s green agenda or tackle the growing air quality crisis.”
However, the association welcomed the Chancellor’s decision to freeze fuel duty for the eighth year in succession, as well as freezing both the VED rates for hauliers and the HGV Road User Levy for another year.
Leasing World’s take on the Budget . . . ? Good news that the Spring Budget will be no more, let’s do away with the Autumn Budget next. Not convinced what use The Budget Shows have been over the decades.