Brown pledges income tax freeze

Prime minister Gordon Brown has pledged basic rate income tax will remain at
20p if
Labour
is re-elected on 6 May.

He gave the pledge, understood to cover the whole five-year limit of the next
parliament – in the midst of his fight to defend plans to increase national
insurance contributions next year for all those earning above £20,000.

It was one of a series of concessions at the start of the general election
campaign culminating in the vote.

Others extracted from the Treasury during the “wash-up” horse-trading process
– deciding which legislation can be rushed on to the statute book before the
campaign proper starts on Monday – are understood to include: scrapping a
Finance Bill provision enabling HMRC to demand a cash deposit as security for
the payment of future PAYE, with a default “fine” of up to £5,000; and limiting
the abolition of furnished holiday lettings relief to those letting
accommodation for more than 20 weeks a year, enabling owners to continue to be
treated as traders in the same sort of business as hoteliers instead of
landlords letting out property.

Both were blocked by the
Tories
and Liberal
Democrats during negotiations to allow the Finance Bill through
before prorogation and dissolution.

Brown’s pledge, in an interview on
Channel
4, followed days of Tory advances in the polls underpinned by their
attack on a “jobs tax” with a letter signed by 68 or more leading businessmen
and industrialists, including many household names, warning it would damage the
economic recovery.

Brown said the revenue was needed to protect schools, policing and the NHS.
He revealed his government had considered raising VAT instead but considered th
e NICs hike “fairer”.

The Clause 35 defeat was signaled by shadow chief secretary Philip Hammond,
who said the security deposit demand would have been “yet another damaging
Labour tax hit on business,” which could faced open-ended costs.

Ministers said the measure would have targeted cases where HMRC deemed
non-payment a serious risk, but Hammond said the clauses were so loosely drafted
any business would have been in danger.

The lettings concession was trumpeted by Liberal Democrat and Scottish
National Party MPs, who said it would help small firms in the holiday let
business hit by a Treasury decision to tax them on the same basis as buy-to-let
landlords because European law forbade a concession territorially limited to the
UK.

He said the change threatened to treat someone running a hotel-like business
in the same way as those buying to let as an investment.

Earlier the Tories signaled an end to the IR35 tax crackdown if they win the
election, making it clear a Conservative government would review “over-complex,
uncertain and often unfair contractor rules”.

Further reading:

Tories
and Labour trading election blows on tax

Finance
Bill carved out in deadline scramble

CBI
demands competitive business tax regime