Avoidance tipped to lead the Budget
Clamping down on tax avoidance is likely to feature prominently in Gordon Brown's Budget.
Experts have warned taxpayers to expect a slew of new VAT anti-avoidance measures in next week’s pre-election Budget speech. Avoidance schemes, designed to get around paying the right amount of VAT, are targeted by the government because they take longer to react to as traders have longer to disclose their schemes.
According to John Whiting, tax partner at PricewaterhouseCoopers, disclosures only started arriving at the Avoidance Intelligence Unit from January this year, meaning that the Budget will most likely be used to announce new legislation.
‘You feel that there’s going to be a few VAT avoidance measures announced in this Budget,’ said Whiting.
This is sure to be a relevant area for Chris Tailby, newly-appointed head of the anti-avoidance group at HM Revenue & Customs, who used to be a PwC VAT expert.
‘You can imagine that [Tailby] will have an interest,’ said Whiting.
Other than the odd minor give-away, the Budget is likely to offer little else of interest, being so close to a general election. Despite this, Aidan O’Carroll, head of tax at Ernst & Young, has urged the government to remember business.
Top of his wish list is for Brown to ‘end the uncertainty associated with the numerous ongoing consultations’, which include the tax charge on researchers’ shares when intellectual property is transferred to university spin-off companies.
Other perennial topics for Budget speculation include inheritance tax and stamp duty. While it is unlikely that either regime will be up for substantial review, an increase in the nil rate band of inheritance tax, could well be one of Brown’s give-aways.
It would also be relatively cheap for the Treasury to increase the stamp duty land tax threshold from £60,000 to £100,000.
The government has been under increasing pressure to revisit the resident and domicile rules, to ensure that rich foreigners pay the same rate of tax as everyone else.
Tax adviser Chiltern has already dubbed this an ‘electioneering Budget’. Brown’s speech is likely to concentrate on the general economy and his favourite subject, tax credits.