The various political parties have all made bold promises in the run up to the General Election about increased spending if elected, particularly extra money for the NHS. Although many of the spending pledges will be funded out of increased borrowing, the parties have assumed that they can persuade voters that extra spending on the NHS should come from general taxation.
The Liberal Democrats policy would be to increase the rate of income tax by 1% to raise £35 billion a year for the NHS and social care. The Conservative and Labour parties propose to provide extra money for the NHS from corporation tax changes.
BORIS TO DELAY 17% RATE OF CORPORATION TAX
Corporation tax is scheduled to be reduced from 19% to 17% from 1 April 2020.
However, in a speech to the CBI on 18 November Boris Johnson announced that, if elected, the Conservative Party would keep the rate at 19% to provide an extra £6 billion for the NHS.
Despite Jeremy Corbyn telling the CBI that the Labour party is “not anti-business” the party have previously announced that they would reverse the recent cuts in corporation tax. Note that the rate of corporation tax was 28% back in 2010 at the end of the last Labour government.
MORE MONEY FOR SOCIAL CARE?
In every General Election since 1997 there have been pledges by the various political parties to resolve the funding of care for the elderly in the UK but yet nothing has happened. It even sparked a dramatic U-Turn by Teresa May in 2015 with her proposal for a so-called “dementia tax”. With the care system in crisis it will be interesting to see what the different political manifestos promise to solve the problem.
Although not strictly a tax matter, for many families funding care fees for the elderly is a bigger issue than inheritance tax (IHT). The current rules in Scotland require the family to make a contribution to care fees where the person’s assets exceed £17,500, including the value of the family home.
The normal IHT planning strategy of giving wealth away and surviving for seven years does not necessarily work as the social care rules are based on the concept of “deliberate deprival” of the estate.
If the local authority consider that the transfer of assets was done deliberately to deprive the estate of assets to avoid paying care fees, then the transfer is ineffective.
We will await to see the outcome on 12 December, and will provide an update in January’s Bean Counter on how that will effect you and your business. If you’re not subscribed to receive our Bean Counter newsletter and would like to be, please let us know.