ACCA gives its view on the Chancellor’s eighth budget
Any bad news was kept to a minimum with the referendum so close, but there was a clear focus on small businesses and young people, although it is less clear where the money will come from, says Chas Roy-Chowdhury, ACCA head of taxation.
'The Chancellor expects to raise an extra £12bn from tax avoidance and evasion, which will be a stretch given the lack of extra resources for HMRC. It may well be that the Autumn Statement later in the year becomes 2016 Budget number 2.' Personal allowances 'This was one small giveaway he couldn’t resist. Raising the personal allowance is actually a little bit of smoke and mirrors. With the new living wage being introduced in April, raising the point at which people start paying tax is pretty much retaining the status-quo when you remember that the lowest paid would have had an increased tax bill due to the increase wage. It’s another example of the Chancellor trying to make people feel better about their finances but actually it’s pretty much no change from before his speech. The raise in the 40% threshold was to be expected, since 1990 the numbers of people being dragged in to the higher tax bracket has increased from 500,000 to 5m.'
Pensions 'We are very pleased that he chose not to make too many changes to the pensions system. The introduction of the pension ISA for the under 40s won’t make a huge difference to the system and may well encourage more people to save. The danger is that he will use this in the future to replace the existing system.'
Business rates review 'Finally we’ve seen some movement on this, with business rates relief more than doubled to £15,000, meaning more than 600,000 small businesses will pay not business rates at all. This will be welcomed by the high street. The decision to devolve business rates to the Greater London Authority in London by 2017 is interesting. It is right that rates are retained by the area in which they are paid, although we could end up with areas of the same countries competing against each other, and when you have competition there is always a loser.'
Business tax road map We are pleased the government is doing more to support businesses. We welcome the proposed 17% Corporation Tax rate by 2020, as it will help move more multinational company headquarters to the UK. The government needs to ensure that the debate around the patent box and a BEPS++ (Base Erosion and Profit Shifting) position coming out of the EU are dealt with effectively and do not create uncertainty in the UK.
North Sea 'We are pleased that the Chancellor has cut the Supplementary Charge from 20% to 10% and all but abolished the Petroleum Revenue Tax, but he could and should have gone further and abolished it completely, rather than ‘all but abolishing it’.'
Stealth taxes The Chancellor is very fond of a stealth tax, they tend to be slipped in quietly, the rise in insurance premium tax of 0.5% was ushered in under the guise of flood defences and will affect anyone who has home or car insurance wherever they live.
Fuel Duty freeze 'The Chancellor has been lobbied hard by his back benchers and the transport sector, so it’s no surprise he’s chosen not to return to the pattern of fuel duty rises, set in place by the previous Labour government. Until last year we’d seen continually rising oil prices. The fall, combined with a continued freeze in duty, has provided welcome relief to domestic and commercial drivers.'