Around 180 business leaders and professionals met at the BDO Budget Breakfast this morning, where a prophetic team had laid on a fun game of Bingo to help engage the audience with what is considered the most exciting Budget of recent years. Stuart Lisle, Lead Tax Partner at BDO LLP in Southampton, commenting on the Chancellor’s 2014 Budget, said:
Introduction
“Confidence up. Inflation down. Exports up, in particular to BRIC countries. Unemployment down. Growth forecasts up to 2.7% moving to a long term growth rate of 2.5%. A General Election round the corner. Scotland in or out? Liberals in with the Conservatives or in with Labour? It’s a funny old world at the moment and it must have been difficult for Osborne to ‘shake it all about’ in his fifth Budget. But now we know that it’s been a Budget for blue rinsers rather than businesses. It’s one lump or two, vicar – and no real shaking it about, if you please.
“So, what came out of the tea leaves for businesses and individuals, and what was left out that should have been in?
Businesses
“George Osborne obviously thinks that everything is heading in the right direction with the economy and exports so there is no need to do much, despite all supportive rhetoric around helping businesses. The £3bn lending to exporters at lower rates should help, but it still feels like a drop in the ocean when compared to the size of the economy and the Government’s target of doubling exports to £1 trillion by 2020.
“The increase in the Annual Investment Allowance (AIA) from £250,000 to £500,000 will certainly be welcomed by those businesses wanting to expand to meet growing export demand and it means that they can now get up to £100,000 tax back on investment in plant and machinery. However, this is only a temporary measure and we would have liked to have seen this set permanently at this level.
“Small and medium sized businesses already get a very generous credit for expenditure on R&D and the Chancellor’s announced increase in the repayable credit for loss making businesses to 14.5% (effective rate of 32.63% per pound spent) from 11% (effective rate of 24.75%) is a bonus, and should encourage more investment in R&D. As my old gran used to say, “Every penny helps”. Our region’s Marine Innovators and high tech manufacturers will see this as a very positive, supportive move by the Government.
“A plethora of new anti-avoidance measures were rapidly announced but these are very targeted, very specific and will impact very few businesses in the Central South. If taxpayers have entered into abusive arrangements they will be required to pay their taxes in advance if they disagree with the GAAR committee or HMRC on their tax treatment – a perfectly fair treatment in the very limited circumstances in which this will apply.
Individuals
“This is where the speech was really focused, presumably to pick up heartland voters ahead of the forthcoming election.
“As widely predicted, the Liberal Democrat-backed increase in the personal allowance to £10,500 will be good for the lower paid and those on middle incomes and perhaps heralds a future move to take all workers on the minimum wage out of tax all together. The marginal increases in the higher rate band before taxpayers fall into the 40% tax rate are welcomed, but the failure to increase the band in line with inflation means that the fiscal drag effect will cause more workers to fall into the 40% rate as wage inflation rises in a growing economy. However it is these sorts of careful fiscal management measurement measures that Mr Osborne has been brilliant at, that will continue to reduce the country’s structural deficit inherited by the previous government.
“Dramatic changes to the way pensioners can access their pension pots have been announced. From 2015, there will be no limits on the amount that can be drawn down, no punitive tax bills on excessive draw downs and no forced buying of annuities. There will also be facility for those nearing retirement to obtain independent advice. On the surface this looks like good news as there is much more flexibility now available for pensioners. However, the cynics would say that the Treasury will stand the most to gain from accelerated tax receipts as pensioners draw down larger amounts from their pension pots at an earlier age – I would say that he has given pensioners the right to manage their own affairs, rather than an industry that has had its fair share of regulatory issues – very wise George!!
“The merger of cash and share ISAs into one and increasing the limit to £15,000 per year is a welcome announcement and will remove an anomaly that helps savers understand what their options are.
“The widely trailed change in the Government’s childcare allowance was announced and will increase from £1,200 to a £2,000 per child per tax year.
…and what was left out
“The old affliction of burdening the country with Welfare bills it could not afford, a tax system that does not encourage self-improvement, massive interest costs on an increasing debt burden, rising unemployment and the risk of Euro entry – Mr Osbourne appears to have left these measures on the opposition benches.
“So after you have finished your tea, vicar, we can have another lovely game of bingo and a pint afterwards – they are both much cheaper now!”
