IF THERE’S ONE BLESSING we can take with absolute certainty from this Budget, it’s that it will be the last time George Osborne and his colleagues will be able to cite “Labour’s mess” for any of the country’s financial shortcomings.
It’s a small crumb of comfort in a year that it likely to feature another Budget in a matter of weeks if not months, and an Autumn Statement to boot.
The overriding feeling from practitioners is the government will be keen to push a ‘business as usual’ message, without many drastic changes, instead making rather more promises of what to expect post-election.
Further avoidance measures
Further steps against tax avoidance and evasion are expected – particularly in light of the HSBC scandal – and Osborne has dropped heavy hints around introducing a new offence of aiding and abetting tax evasion and aggressive tax avoidance, something aimed squarely at professional services firms. Should the proposal be made, it would likely be outlined in a consultation, which will include hefty penalties.
On the individual tax avoiders front, it is thought repeated promoters and users of schemes could be denied access to tax reliefs, while the practice of naming and shaming could be extended, although concerns persist over the accuracy and fairness of previous name and shame initiatives.
The diverted profits tax – or more colloquially, the Google tax – will almost certainly get a mention, but experts appear split over whether it will come in or be deferred.
It’s currently penned in for introduction on 1 April this year, and while many fully expect it to come in unhindered, at least one major firm – BDO – expects the move to be pushed back a year, amid concerns the move unilaterally undermined the OECD’s base erosion and profit shifting project.
There’s a sense that its conceptual threat has already been achieved – in much the same way as the GAAR – with very few multinationals likely to put their hand up and admit they need to self-assess for an issue with the diverted profits tax. Instead, simply altering their tax practices, registering their branch in the UK and paying 20% instead of the 25% diverted profits levy.
Concerns, too, persist over the function of the rule and its potential for extra-territorial effects, and as such a deferral may be required to iron out those issues.
It is likely that further announcements will be made about how the government will continue to stick to the OECD’s BEPS plan, with transfer pricing and country-by-country reporting two areas of the plan that could be introduced.
With these moves, HM Revenue & Customs is likely to require greater resource, something the government will doubtless recognise. The taxman has faced increasing pressure to deliver more with less, and as such may be granted greater financial muscle.
Good news for businesses – particularly SMEs – could come in the form of greater detail around the business rates review originally announced in the Autumn Statement, and launched at the time of writing. The current calculation is based on 2008 property prices, and takes no account of the post-recessionary economy. The clamour for change has been substantial, but the government may be reluctant given how effective a tax raiser it is.
For oil and gas companies, however, the news is rather better. Currently facing particularly high taxes rates, this, coupled with the significant fall in oil prices is placing pressure on North Sea operators. There is a distinct possibility the government will recognise that and make concessions.
This Budget, though, is an opportunity for the government – and particularly the Conservatives – to seek votes, and as such individuals can understandably expect some (rather political) gifts.
To that end, there could be a withdrawal of private residence relief on sales of houses worth more than £2m, while the tax legislation allowing deeds of variation – which enables the beneficiaries to alter the will after death – to be made within a two-year time limit likely to be abolished. The rate of capital gains tax could also be increased.
Those moves are unlikely to have any material impact on the tax take, however, and are instead designed to say more about fairness than anything else.
And while the next government – whatever its composition – is unlikely to tinker too greatly with the bulk of this Budget, it cannot be treated with the usual certainty it carries until after the election. And even then we may go through it all again.
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