Which parts of the Finance Bill will survive the pre-election ‘wash-up’?

19 April 2017

Had this been a normal parliamentary week we might have been reporting on the second reading of the Finance Bill – the start of several months’ consideration by MPs of the detailed proposals set out in the Budget. The second reading debate did take place yesterday but it was completely overshadowed by Mrs May’s surprise announcement. So where does that leave us?

Parliament will be dissolved on 2 May and that will not give enough time for the remaining stages of the Finance Bill progress – and remember that we are dealing here with a bill of 762 pages – to be completed. So what is almost certain is that we will go into the ‘wash up’ process, where government and opposition agree which parts of the bill can be rushed through in the remaining days of this Parliament.

At a bare minimum those clauses which are necessary to preserve the continuity of the tax system (such as the imposition of income tax for the current year!) will be enacted but there will be frantic negotiations over what else should remain. Much of the bill is highly technical – for example 115 pages on corporate losses – and these elements may be nodded through by the opposition. I hope not: not because of any fundamental objection to the proposals but simply because legislation of this complexity needs proper scrutiny to flush out the almost inevitable drafting errors which will have crept in.

More interesting are the areas where there will not be cross party agreement. Jeremy Corbyn has publicly expressed concerns about the quarterly reporting requirements under making tax digital (MTD) and other opposition parties have also criticised them. The legislation giving legal effect to much of MTD is included in the Finance Bill and it may be that this is one of the things which has to be dropped.

If a Conservative government is re-elected then presumably it would be re-introduced, but might this lead to a further slippage in the timetable? HMRC has just started the MTD pilot: would that have to be put on hold if the legislation is dropped? I suspect that there may be a lot of head scratching going on at the highest levels in HMRC about the constitutional propriety of continuing a pilot during an election campaign where the main opposition party is against the proposal.

One other tax consequence of the early election is worth noting. It is only a few weeks ago that Philip Hammond had to withdraw his proposals for National Insurance increases for the self-employed because they broke a manifesto promise. Unless a similar pledge not to raise tax and NIC is included in the Conservative manifesto (and I can’t imagine for one minute that the Chancellor will tie himself down in that way) then reform of NIC for the self-employed – including possible increases in the rate – will be back on the agenda if there is a Conservative victory. Perhaps we will have to dust off all of those briefing notes on the original proposals which we had to consign to the waste bin when the Chancellor changed his mind!

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