Budget 2001: The experts have their say

The Budget in general

Gordon Brown’s fiscal strategy for the forthcoming year was one aimed at pleasing voters, with a number of measures aimed at easing the tax burden on families and pensioners. As far as business was concerned, there were few surprises and the reaction reflected this.

David Whiscombe, chairman of the UK200’s tax panel
‘Gordon is keen to throw money at families and children – but of course it is the poor old employer who will be the unpaid agency through which all this bounty will be dispensed.’

He also called on the government to ‘simplify the ever increasing complexity of taxation’.

IT analysts, Butler Group, said the speech would ‘not be welcomed by many UK companies’, adding that, while the Budget would ‘undoubtedly help families and pensioners’, it could lead to a ‘downturn in the e-business community’.

Ian Lynch, a director at Butler Group said the complex tax code was ‘creating confusion which could distort the behaviour of business’.

Chas Roy-Chowdhury, the ACCA’s head of tax, said he was concerned over the lack of ‘substantive plans to cut the red tape burden’.

He added: ‘He could have announced a radical package of measures to release small firms from multiple administrative and regulatory obligations.’

The CBI seemed generally satisfied with the Budget. Director general Digby Jones said he was pleased the chancellor had opted for a ‘balanced budget’ that would not ‘upset the UK’s macroeconomic stability.

Changes to DTR rules
There was more tinkering with the rules for double-tax relief, the third time changes have been made to this complex legislation for multinational companies.

Martin Kaye, a partner at BDO Stoy Hayward, was highly critical of the changes, saying the chancellor had not made DTR any less complex.

‘He has got DTR very wrong,’ Kaye said. ‘The new DTR regime will lead to complete anarchy. It should have been scrapped.’

Heather Devine, international tax partner at E&Y, was also unhappy with the changes which she called a ‘fragmented fudge’.

Tax-based accounting for SMEs
The proposal to allow SMEs to pay tax on the basis of their accounting profit was greeted by scepticism by some of the big firms.

Lindsay Dodsworth, a tax partner at E&Y, said: ‘Any tax regime for small companies is going to have to deal with companies that are close to the edge in terms of qualification.’

She said the revenue would have to undergo a ‘significant cultural change’ to accept that accounts were right and profit were not being ‘deliberately flattened’.

The ICAEW said it was ‘intrigued by the ‘radical’ proposal, and would welcome it if it meant ‘no disallowances for items such as legal expenses and no adjustment between depreciation and capital allowances’.

Increase in the 10p income tax band
Following, the raising of the 10p tax band to Pounds 1,880, Francesca Lagerberg, senior technical manager to the Institute’s Tax Faculty said it would have been ‘more manageable and simpler to calculate’ if the 10% band would have been extended to Pounds 2,000.

The British Retail Consortium said the measure was ‘good news for the low paid’ and unlike the increase in the National Minimum Wage, ‘would not be an extra cost on business’.

Status quo remains on IR35
Ian Lynch, of the Butler group, attacked the chancellor’s decision not to take any action on IR35, saying: ‘The most famous anti-new economy measure of this chancellor has survived unscathed, demonstrating once again that despite his words about encouraging e-commerce, this government just doesn’t get it.’

Extension of film tax relief
The chancellor’s decision to extended the tax relief scheme available for low budget UK film production until 2005 was welcomed by KPMG which said it would boost the British film industry ‘at a time when UK studios are busier than ever’.

‘The relief worth up to Pounds 200m over three years, will give the industry sufficient time to build on recent developments and growing confidence,’ said Bob Watts, a KPMG partner specialising in film and media.

Climate change levy unchanged
The CBI said the failure by the chancellor to ‘soften the blow of the CCL was the fly in the ointment’ and was ‘seriously damaging UK competitiveness’.

Francesca Largeberg of the ICAEW’s Tax Faculty said: ‘We welcome the exemptions being proposed. However the last time exemptions were announced, the chancellor increased the rate of NIC. We hope this won’t happen again.’


Budget 2001

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