18 June 2020

Promoting Recovery Post-Covid

By Miranda Marshall, Director, Hayes + Storr.

The Government’s “Post Covid-19 recovery plan” sounds good to me and you? I mean, what’s not to like? We could all do with a bit of recovery. Wrong: in politico-speak, it means tax-hikes!

But….who and what to tax? Income will be down for most of us, whether earned or through investments. Many self-employed people and companies will have earned much less or even little or nothing (unless you sell PPE or hand-sanitiser, video games or home hair-dyeing kits). Those with a hospitality, tourism or personal care business are likely to be struggling mightily. Spending is down, despite the ‘non-essential’ shops now being open, and with it VAT. So what is left to tax?

How to square this with traditional conservative voters? Boris and Dominic have another 4 years in Downing Street, so short term pain may have been forgotten by 2024.

The country needs to feel down the back of the sofa and smash open its piggy banks to pay for all the furloughed workers, the Nightingale Hospitals, the Bevanite big government…..

In early July the chancellor Rishi Sunak will make some announcements intended to promote a post-coronavirus recovery, although HM Treasury has stressed that the ‘fiscal event’ will stop short of a second Budget.

The emergency measures introduced by the Government to help workers during the Covid crisis is said to be costing the Treasury about £14,000,000,000 each month (that’s 14 billion GBP, a lot of noughts). It will increase public sector borrowing to £300,000,000,000 this year.

Cue, otherwise politically-impossible, tax increases.

The items on the pundits ‘hit-lists’  are Capital Gains Tax (“CGT”) rates, Inheritance Tax (“IHT”)  reliefs (especially business and agricultural property reliefs), Stamp duty Land Tax and tax-free pension lump sums. Time to examine your tax-planning!

Take professional advice; and especially so, if you are planning gifts as part of succession or Inheritance Tax planning, or are buying a house. If you are lucky enough still to have any assets showing a capital gain which you wish to sell or give, these too will need careful review.

The 100% reliefs on IHT on farming and business assets are easy targets. The threat is that they will go down to 50%. So too is the CGT ‘uplift’ on death, which wipes out all gains to that point.

The second Budget is due in the autumn so we may be spared until then. But it will be easier politically for the Government to introduce tax increases sooner rather than later in the wake of the Coronavirus.

The two Chinese curses of Covid-19 and ‘living in interesting times’ go hand-in-hand.

If you would like further advice on this matter please contact Miranda on 01328 713913. If you require advice on any other legal matter call 01328 863231 or email law@hayes-storr.com.

This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.