Post-Budget report

Is there anything in this budget, which will encourage companies in
the UK to be more competitive?

Adam Bainbridge: The announcement on real estate investment
trusts – that’s a real boost to the real estate industry. It’s a structural
change and will hopefully reduce the tax burden, and that is going to be a great
thing. The second one that was interesting was increasing the tax relief for
venture capital trusts. These are like investment trusts that private investors
can invest in with a particular tax benefit and the trust can then invest in
qualifying companies which generally speaking are UK trading companies of a
modest size. I think the increase of the tax relief for venture capital trusts
was up from 20% to 30% so that’s fantastic and that’s sort of what the
chancellor in his speech honed in on.

What are the immediate issues from the Budget for people running a
company?

Alastair Kendrick: The are three things that come out of the
Budget for me. Firstly, some sort of harmonisation of income tax and national
insurance which is long overdue. Then we have a surprise measure that came
across with regards to computer schemes and mobile phones.

The outline of the press release seems to be cutting out the fringe benefit
of the mobile phone and also the computer initiative. The third thing from an
employment tax side is company cars, and it would be interesting to see what
impact the increases in road tax has.

Is the newly introduced 30 day time limit for registering tax
avoidance schemes strict?

Hartley Foster: They have introduced a rule whereby if you
devise a tax scheme in-house you are required to ensure that you notify the
revenue within 30 days of implementation. So it’s bringing forward the date by
which you have to tell the revenue about the scheme you have introduced. And it
is absolutely right, there are penalty provisions within the regime and you will
face a penalty. There is an exemption for SMEs who don’t have to disclose
in-house schemes on that basis.

Does the panel agree that since the inland revenue has joined with
customs they have become more aggressive and uncompromising?

Adam Bainbridge: I think that HMRC has become more
aggressive, I’m not sure that it is to do with the merger with customs. I think
this aggression from HMRC started well before that, it probably goes back to
2001/02, you could see it start as a sort of arcane debate around tax avoidance
through the trade press and then it emerged more into issues about ethics and I
don’t think its going away.

From the perspective of Gordon Brown trying to make the numbers add up and
deal with the tax gap, its making the UK less of an attractive environment.

Do you think the chancellor should have cut corporation tax, and do
you see anything that could help ease the burden?

Hartley Foster: What I think is more important than cutting
the level of corporation tax is ensuring that our system of corporation tax is
harmonised with the rest of Europe. There are a number of aspects of our system
that discriminate between resident and non-residents that are currently being
challenged by references to the European Court of Justice. This country along
with other member states needs to sit down and ensure that their tax systems are
reformed so that they’re compatible across the European Union.

Could you sum up your final thoughts on the Budget?

Hartley Foster: I would just like to mention a further crack
down on what is known as carousel fraud. Its interesting that the government is
seeking derogation from the normal VAT rules from the EC as a way of cracking
down on this. There is no reference made in the Budget to the fact that they’ve
just lost a very important case in the European Court of Justice in Bond House
Systems and how they’re reacting to that. Overall we have to wait to see what’s
in the finance bill.

Adam Bainbridge: My final thoughts are on competitiveness. I
think the UK has one of the lowest tax rates for companies in the G7, but
somebody said to me earlier that if you actually compare our rates within the
European Union, we only have the seventh lowest rate. So I think there is all to
play for as the UK battles for its fair share of global trade.

Alastair Kendrick: I think the issue that probably we’ve
touched around was anti-avoidance and I think there are quite a few happy
accountants and tax advisers around thinking there has been a lot of prediction
that there is going to be a whole load more, than actually emerged.

This week’s experts

Adam Bainbridge is a tax partner at KPMG

Alastair Kendrick is the tax partner at Wilder Coe

Hartley Foster is a tax lawyer at DLA Piper

Chaired by Paddy O’Connell, a freelance business journalist