December 2019 General Election: Our tax review of the Conservative manifesto

A striking feature of the 2019 General Election is the big difference in the tax proposals of the main three parties.

Our tax experts have reviewed their manifestos and summarised the parties’ thoughts on how their proposed policies could affect you and your business.

Conservatives: Business as usual, unless you are selling

From a tax perspective this is a fairly low-key manifesto with no major tax changes announced. The take away message is the potential reform of capital gains tax entrepreneurs’ relief on the sale of business assets as it is recognised this is not working in its current format.

While there is no announcement as to what the reforms may be, some potential changes could be:

  • Increasing the qualifying period of ownership to greater than two years;
  • Decreasing the current lifetime allowance from £10 million per individual;
  • Increasing the 5% ownership threshold for shares;
  • Restricting the assets which qualify for the relief.

Individual Taxation

  • No increase in income tax or national insurance rates
  • National Insurance threshold raised to £9,500 with effect from 6 April 2020 with an ambition to raise it to £12,500.

Thought –Will the personal allowance be frozen to allow the national insurance threshold to catch up?

Business Taxation

  • Reduction of business rates. The first step being to reduce business rates for retail businesses, grassroots music venues, small cinemas and pubs.
  • Increase the Employment Allowance from £3,000 to £4,000 in 2020/21.
  • Increase the R&D Tax credit to 13% from 12% (large companies only). The SME R&D scheme appears to remain untouched.
  • Review the definition of R&D to include cloud computing and data.
  • Extend SEIS and EIS into the next parliament.
  • Corporation tax flat rate of 19% to stay.  The scheduled reduction to 17% from 1 April 2020 scrapped.
  • Increase the rate of capital allowances on structural buildings from 2% to 3%

Indirect taxes

  • No increase to VAT rates in the lifetime of the parliament. This is not as reassuring as it first appears and still provides flexibility in the event of a shock to the economy post Brexit. In addition to the standard rate of VAT, there is a reduced rate of 5% and zero-rates on specific items. The Treasury has a long held desire to ‘modernise’ VAT and leaving the EU provides the freedom to achieve that aim.
  • Plastic packaging tax where the recycled content is below 30%
  • A headline grabber, the much-anticipated removal of VAT on sanitary products.

Other Measures

  • Tackle tax evasion,
  • Digital Services Tax to ensure major international companies pay their fair share.
  • Increased stamp duty surcharge on non-UK resident buyers.

Click through to read our tax review of the Labour and Liberal Democrat manifestos.