The Budget: AAT’s view on stamp duty, VAT, business rates and more

The Budget has received a mixed reaction from the media and commentators.

AAT will be providing a comprehensive response to the Treasury Select Committee ahead of their evidence session with the Chancellor on 6 December 2017. Before then, some initial reaction from AAT’s Head of Public Affairs & Public Policy, Phil Hall…

Stamp duty

The Chancellor announced that all first-time buyer house purchases up to £300,000 will no longer have to pay Stamp Duty. This will cost approximately £600m a year and means there will be no Stamp Duty for 80% of first time buyers.

Our alternative plans to simply switch liability from the buyer to the seller would have helped 100% of first time buyers, not 80%, and would also save £600m as Stamp Duty would continue to be paid but by different people (sellers not buyers).

The changes announced by the Chancellor are well-intentioned but unnecessarily costly and less effective than AAT’s alternative. We accept switching liability is not a panacea but it would mean that the £8.6bn of much needed revenue that residential Stamp Duty generates would be protected.

Our recommendation would also neatly fit with policymakers apparent desire for greater generational fairness – it would immediately remove 100% of first-time buyers from the tax whilst ensuring downsizers, typically the elderly, who are likely to be in a better financial position than first time buyers, might pay a little bit more as they’d be paying duty on the home they are selling rather than buying.


The Chancellor said that he was not minded” to reduce the VAT threshold following publication of the OTS review of the tax. However, he went on to state that he would, …consult on whether its design could better incentivise growth. And in the meantime we will maintain it at its current level of £85,000 for the next two years.”

The Budget announcement very much ties in with our own members views. The AAT 2017 VAT Survey demonstrated that 36% of AAT members would like to see a substantial increase in the threshold, 32% want the status quo maintained and just 13% would like to see it lowered.

It may be sensible to consult further although there has already been an OTS consultation and the Treasury have looked at this in the past so there seems to be a degree of caution about making the changes needed. Nevertheless, AAT looks forward to taking part in any such consultation in the coming months.

Apprenticeship Levy

During his Budget speech, the Chancellor commented on the Apprenticeship Levy by saying he would, “… keep under review the flexibility that levy payers have to spend this money.”

Approximately 20% of AAT’s 90,000 student base are apprentices so we have a vested interest in the success of the Levy. That said, we also recognise there are wider issues at stake.

There is now a clear opportunity for a fresh start; a chance to address the collapse in Apprenticeship starts, the frustrations of many employers and the future skills needs of UK plc.

Since the Apprenticeship Levy was first announced in 2015, AAT has argued that it should be renamed as the “Skills Levy” and Levy monies should be freed up to spend on traineeships and other forms of high quality training that will benefit individuals, employers and the economy.

AAT has met with the Skills Minister to discuss this issue and again wrote to her a few weeks ago calling for greater flexibility in the way levy monies can be spent. We have also included the issue in our members survey detailing their top five priorities for 2018.

An increasing number of organisations have joined AAT’s calls for this to happen over the past two years, from large employers such as Diageo and Manpower Group to SMEs such as JJ Churchill; from think tanks and specialists such as the Learning & Work Institute and the Association of Colleges; not to mention professional bodies such as the Chartered Institute of Personnel & Development (CIPD).

According to a to an AAT/YouGov survey in December 2016, there is strong political support for such a move too. 65% of MPs (cross party) support the idea that the Levy should be renamed and developed to allow funding for skills other than apprenticeships.

In short, increasing the flexibility of the Levy would foster much needed improvements in productivity across the whole workforce, deliver greater value for money and yet have no significant revenue implications for public funds. It’s a win-win situation that needs to be put into action as soon as possible.

Digital skills

Whilst the focus amongst the accountancy profession may be on ensuring our own digital skills are up to scratch with Making Tax Digital hurtling towards us, the wider digital skills base is of great concern.

The Chancellor said, “…the Education Secretary and I are launching an historic partnership, between government, the CBI and the TUC – to set the strategic direction for a National Retraining Scheme.

Its first priority will be to boost digital skills and to support expansion of the construction sector. And to make a start immediately, we will invest £30 million in the development of digital skills distance learning courses, so people can learn wherever they are, and whenever they want.”

This is a great start but there is more to do.

Given all jobs in the future are likely to require some form of basic digital skills understanding, a requirement for all students to have basic digital skills at GCSE grade 4 (grade C) or above in the same way that most employers currently require students to have GCSE Maths and English, would be a welcome statement of Government intent. And of ensuring young people, parents and employers appreciate the rapidly increasing importance of digital skills.

The forthcoming Government Careers Strategy must make specific provision for digital skills too and similarly Government could play a more active role in raising awareness of the numerous free digital skills programmes being offered by the likes of Google, Microsoft and Barclays.

Business rates

AAT has long called for a switch in the inflation measure from RPI to CPI and welcomed the Governments previous commitment to doing this in 2020. Moving this forward two years to 2018, as announced by the Chancellor this month, will cost the Treasury £2.3bn but its money that many businesses, especially SMEs, desperately need.

AAT has also long called for more frequent revaluations – at least every three years – so we are pleased the Government have committed to this as well. However, waiting until 2022 to do so is somewhat frustrating and will cause problems for many SMEs.

Whilst these have been the two key “short-term” reforms to business rates that we have sought, we have also been pushing for more wholesale reform of the business rates system. We’d like to see the rates system replaced with a new system that adequately takes into account the growth of online competition. We are seeking members views on this issue too.

Patient capital

The Chancellor announced a number of proposals relating to Patient Capital in his 2017 Budget speech including a strong commitment that the Government, “…stand[s] ready to step in to replace European Investment Fund lending if needed.”

Hammond also said that Government would create a new fund in the British Business Bank, seeded with £2.5 billion of public money and that they would help facilitate pension fund access to long term investments.

The public commitment to replace the European Investment Fund (EIF) if necessary is most welcome. It’s not clear that Brexit requires our departure from EIF. There are a number of non-EU countries who already participate in it and shareholders in the EIF are not just EU member states but a number of public and private banks and financial institutions, several of which are based in the UK. There is no legal barrier to the UK continuing to operate in EIF after Brexit.

That said, the reality is that they have already scaled back investment in the UK.

The British Business Bank can step into the breach if necessary but it will need beefing up as we made clear in our August 2017 consultation response.

The suggestion that pension fund access to long term investments will be facilitated is a step in the right direction, although we need to see the detail as to what this will mean in practice. AAT hopes Government will carefully look at examples of international successes like the Ontario Teachers’ Pension Plan when doing so.

Phil Hall is AAT's Head of Public Affairs and Public Policy.

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