Grant Thornton Top Ten Budget Prections
GRANT THORNTON'S HEAD OF TAX, FRANCESCA LAGERBERG
SAYS:
"This pre-election Budget will focus entirely
on what the Chancellor did to maintain market stability during the
recent economic crisis. It is unlikely that he will set out further
bold tax rises as every vote will count in the run up to the formal
election campaign.
"There may be targeted but small tax breaks
for the most vulnerable sections of society including families on
low incomes and the elderly. It is also likely that the
Government will introduce further anti-avoidance measures
including, more stringent requirements for tax advisers to inform
HM Revenue & Customs (HMRC) of clients who adopt more
aggressive planning measures.
"With most MPs having their eyes firmly on the
election, the Finance Bill which will follow the Budget is likely
to be subject to barely any detailed scrutiny from Parliament which
leaves little scope for picking up any operational problems or
errors."
1. More measures to reduce
unemployment
It is expected that further measures will be
taken to help both 18-24 year olds and the long-term unemployed
back into the work force to help rebuild the economy. It remains to
be seen whether any jobs created under the current government
schemes will be real, sustainable jobs, or if we are simply
returning to the days of previous recessions where there were a
multiplicity of 'schemes' for young people, few of which led to
lasting employment.
Any measures announced in the Budget to aid
unemployment are welcome, but many employers are concerned about
the 1% National Insurance Contributions scheduled for April 2011
which could impact hiring decisions.
2. VAT to remain at 17.5%
We expect VAT to be left alone in this Budget.
However, there is no doubt that any new Government of whatever
political persuasion will consider that our comparatively low
standard rate may need to be increased in the near future to reduce
the spending deficit.
3. Increased anti-avoidance
measures
To help close down aggressive tax planning and
raise revenue, we expect to see a number of targeted anti-avoidance
measures. These may include stringent requirements for tax advisers
to inform HMRC of the activities of their clients. In addition,
HMRC has been looking at specific measures to target 'wrong doing'
tax advisers although it is now expected that specific legislation
may not appear in the forthcoming Finance Bill as more consultation
is being sought.
4.Tobin tax to win votes is
unlikely
It is unlikely that the Government will commit
to further tax measures in the banking industry along the lines of
the so-called Tobin or 'Robin Hood' tax. There is still much debate
around this area which may preclude any official announcement at
this stage.
5. Rise of Green Taxes
Green taxes may seem more palatable for voters
than an increase on alcohol or tobacco duty, particularly if
targeted at the more anonymous business taxpayer. The car scrappage
scheme was well received and a good way of raising revenue without
harming the automotive industry. Consequently we believe the
Government will capitalise on public sympathy towards environmental
programs by creating similar schemes.
6.Tax Credits
Tax credits have proved to be a popular
vote-winner and this will be at the forefront of Labour's mind as
the election looms in May. We expect the Chancellor to enhance the
tax credit system to aid less well-off voters. It is unlikely that
we will see any more significant wholesale reform so close to an
election.
7. Corporation tax rate to remain the
same
It is unlikely that the corporation tax rate
(mainstream or small company rate) will change in this Budget. The
small companies' corporation tax rate is expected to remain at 21%
in this Budget with the planned increase to 22% delayed until
2011/12.
There has been reform of the
controlled-foreign company regime and the Chancellor may announce
further amendments here to boost the UK's attractiveness as a
location for business.
8. Statutory Residency Test for
Non-Doms
The UK's tax rules on UK residency for tax
purposes have come under close scrutiny in the courts. For some
wealthy individuals, the Robert Gaines-Cooper case has thrown
further doubt on what the tax position is of non-domiciles. The
current Government has expressed its support for a full statutory
residence test in the longer term, subject to some conditions. We
will not see any draft test make an appearance this time around but
we might see some further commitment to keep this area under review
in the Budget.
9. Basic state pension
changes
The Chancellor may increase the basic state
pension via a pension credit scheme. This is not without its
complications but would be an attempt to help those on lower
incomes. There may also be further amendments made to the state
second pension (SERP) .
10. HMRC powers
There is likely to be another range of powers
provided to HMRC. We would expect to see further legislation around
aligning interest rates applicable to all taxes and more draconian
provisions aimed at bulk repayment claims, some of which have been
used to defraud HMRC.
ENDS
For further information please
contact:
Suvra Datta, PR Manager, 0207 728 2375 or via
email on mailto:suvra.datta@gtuk.com_
Nicola Daley, PR Executive, 0207 728 2244 or
via email on Nicola.daley@gtuk.com