Paul Falvey, Tax Partner at BDO LLP in Bristol, commenting on the Chancellor’s 2015 Budget, said:
“Despite the Chancellor promising not to pull a rabbit from the hat, there were in fact plenty of Budget bunnies to be seen.
“This was a Budget for everyone designed to appeal to as many voters as possible low earners, high earners or businesses. With Britain growing ahead of its major international competitors and an election coming up so soon, it’s clear that the Chancellor felt confident enough to splash out on a raft of mini-giveaways.
“But, as ever, George Osborne gives with one hand and takes with the other, planning to raise even more revenue from tax avoidance and a raid on the banks featuring at the top of the list.”
Businesses
Richard continued:
“The launch of the Treasury’s review into business rates is welcome but long overdue. While it’s promising to see that the Treasury is open to considering a change in tax base and a possible move away from rateable values, the real challenge will lie in how any positive changes can be introduced to replace the current outmoded system whilst preserving tax neutrality.
“There is likely to be a long period of review and consultation such that any benefits of change are unlikely to filter through until well into the next Parliament. It will, therefore, be a watching brief for some time yet which will offer little respite for mid-market retailers who continue to feel the pain of rates set in 2008 – values which take no account of the fall in property prices since the recession.
“As expected, the Chancellor is pushing ahead with the ‘Diverted Profits Tax’ aimed at tackling tax avoidance by multi-national companies, which comes into force from 1 April. No doubt other countries will consider that the UK has jumped the gun ahead of the OECD’s BEPS proposals, but I see this as a way in which Osborne will force companies to voluntarily declare more tax in the UK rather than run the risk of paying the punitive 25% rate under this new tax.
“Tax avoidance again featured highly, with a range of measures including Employment Tax Saving Schemes and loss planning identified for attack, which would raise an estimated £3.1bn.
“The raid on the banks also goes on, with an extra £5bn to be raised from an increase in the bank levy and no tax deductions for compensation payments, such as PPI, made to customers. It’s a good job that banks don’t vote.
“The creation of eight new Enterprise Zones should be a boost to businesses in deprived areas particularly mid-sized businesses and there is a promise to maintain the Annual Investment Allowance (currently at £500k) at a reasonable level, rather than being reduced to £25k from 2016.
“The oil and gas industry have been a natural beneficiary of this Budget given that the sector is in difficulties arising from the reduction in the oil price since June last year. A reduction in tax rates and increased allowances for capital expenditure will bring a very welcome c£1.3bn saving to that sector.”
Individuals
“This is where the battle ground for the election starts and the Coalition parties have clearly laid out their stall to attract voters.
“The increase in personal allowance was very well trailed and the increase to £10,800 for 2016 and to £11,000 for 2017 will be welcomed by low and middle earners alike and will cost in the region of £1.5bn extra per annum to the exchequer. Higher rate tax payers will also benefit from the increases in the higher rate tax band above inflation.
“More flexibility for pensioners with annuities will have a significant appeal to the older age groups as will the removal of tax on interest related to savings of up to £1,000 per year.
“At the other end of the age scale, the newly announced Help to Buy ISA for first time buyers will be welcomed by younger generations struggling to get on the property ladder as well as their parents. This appears to be a very generous relief with the Government contributing 25% of ISA deposits that are saved up to a maximum of £3,000, costing up to £835m per year up to 2020.
“Finally, the removal of class 2 national insurance will not only be appreciated by the self-employed but also HMRC who will no longer have to administer the tax.”
… And what was left out
“As is becoming a worrying trend, there was very little in the Budget to help mid-sized businesses. Despite a building rhetoric behind the scenes, any suggestion of how HMRC may start to adopt a more considerate and focused approach to these businesses was missing. There was also very little in the way of incentives for Britain’s mid-sized exporters. We would like to see much more for this engine room of the UK economy from whoever wins in May.”
