Brown’s budget to be most politically motivated ever

Experts are predicting that Gordon Brown’s final Budget next week will be his
most political ever as he attempts to win over dissident Labour backbenchers and
establish his leadership manifesto.

The chancellor is expected to amend VAT on gas-guzzling cars and inefficient
consumer appliances by introducing a new 25% band on these items, and reduce VAT
payments on ‘green’ vehicles and electric goods.

Advisers also believe that Brown will add higher bands of stamp duty land tax
on expensive homes and tighten anti-avoidance rules for IHT.

Nigel May, tax principal at MacIntyre Hudson, said major changes to tax rules
were unlikely as recent tax receipts had removed the need to plug budget
deficits with large revenue raising taxes. This would free Brown up to lay out
his leadership agenda.

‘This will have to be Gordon Brown’s most political exercise as he tries to
set out his leadership manifesto to the Labour Party. There is certainly likely
to be more green posturing and tightening the IHT net,’ May said.

John Whiting, tax partner at PricewaterhouseCoopers, said anti-avoidance
would feature strongly in the Budget announcement. The Treasury has already
released the details of eight avoidance schemes that will be shut down in the
Budget speech.

‘It is strange to announce legislation closing eight schemes when you have a
Budget in a few weeks time, but this probably shows how important anti-avoidance
is to the Treasury,’ Whiting said.

On the corporate tax front little if any change is expected. Deloitte
corporate tax partner Bill Dodwell said the most that could be expected was the
announcement of a consultation paper on the taxation of UK companies with
foreign subsidiaries.

‘In the pre-Budget report Brown said he would launch the paper in the Budget.
We expect this to deal with controlled foreign companies and double taxation,’
Dodwell said.

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