What chance of a Budget Day surprise?
FENELLA MARTIN-REDMAN, tax partner at Baker Tilly’s East Anglia office, looks at what might be in store tomorrow’s on George Osborne’s Budget
WITH Budget Day imminent, much is already known about the contents of tomorrow’s announcements.
However, almost without doubt, there will be a few surprises. Here are some pointers, based on what is known already and on informed speculation:
n A reduction in capital allowance rates. The reduction in both the annual investment allowance and writing down allowance from April 2012 is part of the cost of having lower headline Corporation Tax rates.
n Administration in respect of Stamp Duty Land Tax and commercial leases: a number of the rules are unenforceable and, for many, incomprehensible.
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n Alignment of Income Tax and National Insurance Contributions, reducing the unnecessary compliance burdens on business, especially small businesses.
n Reduced tax rates for income from patents. A “patent box” regime, providing for a 10% rate of tax on patent income, is expected to be introduced in 2013 to encourage retention of patents in the UK.
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n A final version of anti-avoidance rules in respect of controlled foreign corporations. The complexity of these measures has necessitated the phasing in of the changes.
n A simplification of procedural rules regarding enterprise investment schemes. This is a relief in need of rationalisation.
n Possible addition of more goods and services to the 5% VAT rate. In 2009, agreement was reached between all 27 EU Member States to extend the reduced rate of VAT to a number of additional goods and services.
n The possible closure of a VAT “loophole”. The �18 Low Value Consignment Relief has been exploited by a significant number of UK-based businesses to avoid paying VAT on sales of CDs, DVDs, contact lenses and other items to UK consumers.
n A review of Inheritance Tax. “No change” is not to be discounted, but other options include abolition (unlikely when the Government is scratching around for every penny it can get); replacement by a tax on recipients of gifts/legacies (better aligned with international practice and so better able to provide for double taxation relief); or Capital Gains Tax on death (addressing in part, at least, the criticism that Inheritance Tax serves to tax again on death that which has often been taxed in life).
n A potential simplification of the rules governing Capital Gains Tax on an individual’s principal private residence.
To discuss these and other issues arising from this month’s Budget, please do contact us at Baker Tilly’s East Anglia office on 01284 763311 or by e-mail at firstname.lastname@example.org.