TAX PRACTITIONERS expect plenty of revenue-raising activity in today’s Budget, as the chancellor looks to fund spending giveaways for businesses.
Capital allowances for major infrastructure projects, announce more support for flood victims, a VAT zero-rating on supplies for exporters and an extension of tax-free childcare as the chancellor gives to business, but it is thought he will take from pensions and lifetime ISA savings with a cap.
To that end, the annual pensions allowance is likely to reduce from £50,000 to £40,000 from April.
But, there is the caveat of the election next year, and so the government will want to generate as much goodwill as possible as it approaches, practitioners point out.
With that in mind, there have been significant calls for the increase in the 40p threshold given, as Saffery Champness tax partner Ronnie Ludwig puts it, “it was never intended for middle earners such as teachers and junior managers”, something that could become a political issue in due course.
Equally, the public is keen to see something done about corporate tax avoidance, and while targeting multinationals is “not necessarily the most cost-effective way of improving the public finances, it’s certainly a popular one”, ACCA head of taxation Chas Roy-Chowdhury wrote in City AM today. Be that as it may, Osborne and the rest of the G20 finance ministers have been heavily involved in the OECD’s action against profit shifting, and it is most likely the government will await its recommendations later this year.
That said, a renewed crack-down on avoidance is widely predicted, with a robust new regime and heavy penalties attached for non-compliance, aimed not only at the promoters of those schemes but also at the users of the schemes likely to be announced. Moves are also expected to simplify the taxation of employee benefits and expenses, while a reduction employer national insurance for young employees could be brought in.
In-keeping with that popular theme, first year allowances for business are expected to be increased to £500,000 to encourage investment, while tax relief for UK creativity could follow.
“Successive governments have introduced reliefs for the creation of intellectual property through reliefs for things like R&D, film production costs, electronic games, high end TV productions,” Crowe Clark Whitehill head of tax Laurence Field said. “The government may be tempted to introduce reliefs for other areas of intellectual property such as designs or copyrights.”
CIot urges HMRC to consider a delay to the 1 September 2017 introduction of its new corporate offence of failure to prevent the criminal facilitation of tax evasion
HMRC intends to extend the date for withdrawal of transitional relief on investment growth from 30 November 2016 to 31 March 2017
The current business rates system is over-complex and reform is needed, but reforms should focus first of all on simplifying the appeals process, particularly for businesses which are subject to business rates exemption
The CIoT has called on the government to rethink its approach to ensuring online sellers pay the correct amount of VAT.